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What is your reckon our system of government operates? It could be along the lines of this. We elect MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. Yet, that’s how it once functioned. Those days are over.

The Rise of Secret Courts

Nowadays, international firms, and the oligarchs who own them, can sue nation states for the policies they pass, at private courts composed of commercial attorneys. These proceedings take place away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including companies based in this country. The door is open exclusively to businesses registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but money the arbitrators decide the company might otherwise have made. The state might be compelled to rescind the measure. It becomes deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The outcome? National sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings enacted by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The Labour government subsequently revoked the licence the Tories had approved. Today, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the companies bringing the case.

During August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had received permission to commence operations. We have little idea how much this could amount to. Which individual is representing it against the state? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to fight the sanctions the UK levied against him after the Russian aggression. He has already initiated proceedings against a small nation on these grounds, seeking $16bn: an amount representing half government’s yearly budget. Included in the legal team representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An expert on this matter labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by widespread derision.

That threat is now a reality. Recently, fossil fuel and extraction companies have filed a historic level of cases against nations rich and poor, opposing – as in the case of the UK mine – official measures to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP