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How do you perceive our system of government works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. Well, that used to be how it operated in the past. No longer.

The Emergence of Secret Arbitration Panels

Today, foreign corporations, along with the oligarchs who own them, are able to litigate against governments for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are held in secret. Unlike our courts, these panels grant no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. They are open solely for corporations based overseas.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It is deterred from enacting future policies along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations observe each other, and private equity finance suits in return for a share of the awards. The consequence? Sovereignty and democracy are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions made by parliaments is that this stipulation has been written – absent public approval, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer found that plans to dig the first new deep coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the permission the former government had issued. Today, this legal outcome faces being overturned by an offshore tribunal accountable to only the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to commence operations. We have no idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK enacted against him following the war in Ukraine. He has already started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's yearly income. Among the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in using frozen Russian assets as security for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” An expert on this matter labelled critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That prediction has now materialised. In the current period, fossil fuel and mining firms have lodged a record number of cases against nations rich and poor, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Companies have so far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP