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How do you understand our system of government functions? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Secret Courts

In the modern era, foreign corporations, and the oligarchs who own them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, including companies headquartered in this country. The door is open solely for corporations operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These sums represent not actual losses but compensation the arbitrators decide the company could potentially have made. The state might be compelled to abandon its policy. It becomes deterred from passing future laws in that area, worried about facing litigation.

A Process Spiralling Out of Control

Record numbers of disputes are being initiated, as companies take cues from each other, and investment funds finance suits in exchange for a portion of the awards. The consequence? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions taken by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The new government subsequently revoked the consent the previous administration had approved. Now, this success is under threat by an secret arbitration panel answering to no one but the companies bringing the case.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has no idea how much this might be. What legal team is representing it against the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the domestic court upholds it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case to date, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has started suing Luxembourg with similar intent, seeking sixteen billion dollars: half that state's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that these scenarios wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a case in the past.” A consultant on this issue accused critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and mining firms have initiated a record number of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP