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Can you perceive our system of government operates? Maybe similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. Well, that’s how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, overseas companies, along with the oligarchs that control them, can sue nation states for the regulations they pass, at secret arbitration panels composed of business advocates. The cases are held behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, including companies headquartered in this country. Access is granted exclusively to entities registered abroad.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

These sums are based not on actual losses but funds the tribunal officials determine the company might otherwise have made. The government could be forced to abandon its policy. It is discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being brought, as companies learn from each other, and hedge funds finance suits for a share of a cut of the settlements. The result? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the decisions made by elected bodies is that this clause has been incorporated – without public consent, and frequently under a climate of total confidentiality – inside international trade agreements.

A Real-World Instance: The UK Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer determined that proposals to open the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the permission the former government had approved. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the entities filing the suit.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was set up to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to commence operations. The public has no idea how much this could amount to. Which individual is representing it against the state? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a international entity challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it seems likely that he may employ the tribunal to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: an amount representing half nation's yearly income. Included in the legal team on his side? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that these events wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies grasp the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has come to pass. In the current period, oil and gas and mining firms have lodged a historic level of suits against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have so far won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP