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What is your reckon our system of government works? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. However, that was how it operated in the past. No longer.

The Emergence of Secret Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, can sue elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to entities registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums represent not tangible damages but money the arbitrators determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is hesitant to introducing similar legislation in that area, worried about facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being filed, as corporations take cues from each other, and hedge funds fund legal actions in return for a share of the awards. The consequence? National sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions enacted by elected bodies is that this clause has been inserted – without public consent, and often in a climate of total confidentiality – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the High Court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The incoming administration later cancelled the permission the former government had issued. Now, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the corporations bringing the case.

During August, a firm whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to proceed. We have no idea how much this sum represents. Who is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity contests it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he will utilise the tribunal to fight the penalties the UK imposed on him following the Russian aggression. He has filed a claim against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of nation's yearly income. Included in the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that such things wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with scepticism.

That warning has come to pass. Recently, fossil fuel and extraction companies have initiated a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – government attempts to halt global warming. Corporations have thus far won $114bn through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP