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What is your understand our system of government works? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

Today, international firms, and the wealthy individuals who own them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of business advocates. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or judicial review. The general public cannot take a case to them, just as our government, or even businesses based in this country. The door is open exclusively to entities based overseas.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums represent not tangible damages but funds the arbitrators determine the company would perhaps have made. The government could be forced to drop the legislation. It will be deterred from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as firms take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The outcome? Sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions taken by parliaments is that this clause has been inserted – absent public approval, and often in a climate of total confidentiality – within international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, 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, at Whitehaven in Cumbria, were unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the former government had approved. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to no one but the companies bringing the case.

Last August, a corporate entity whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this might be. Which individual is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the previous government, the noted patriot the MP. The government enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a ministerial statement 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 seems likely that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half government’s yearly income. Among the counsel representing him there? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that these events could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Warnings that “once firms start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the developed economies” were greeted by scepticism.

That threat has now materialised. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations across the economic spectrum, contesting – like the example of the UK mine – official measures to prevent environmental catastrophe. Firms have thus far won $114bn via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP