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Can you reckon our system of government operates? Maybe something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Advent of Secret Courts

In the modern era, overseas companies, along with the oligarchs behind them, can sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. Differing from national judiciaries, these bodies allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including enterprises based in this country. Access is granted solely for corporations based overseas.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards represent not actual losses but money the arbitrators decide the company could potentially have made. The government may have to rescind the measure. It is hesitant to passing future laws of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Historically high figures of disputes are being filed, as corporations learn from each other, and private equity finance suits for a share of a portion of the awards. The consequence? National sovereignty and popular rule are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the decisions taken by elected bodies is that this clause has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government later cancelled the consent the previous administration had granted. Now, this success faces being overturned by an offshore tribunal accountable to no one but the corporations bringing the case.

In August, a company whose final controllers are located in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the US capital was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this might be. Who is representing it challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, seeking sixteen billion dollars: equivalent to half of state's annual revenue. Among the legal team on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Risks

The public was told that these events were not possible. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this matter described critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has now materialised. In the current period, fossil fuel and mining firms have filed a record number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to prevent global warming. Corporations have so far won vast sums via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP