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How do you reckon our system of government operates? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Legislation is maintained by the courts. End of story. Yet, that’s how it used to work. No longer.

The Emergence of Secret Tribunals

In the modern era, international firms, and the billionaires who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. The general public cannot take a case to them, nor can our government, or even enterprises headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but money the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It is deterred from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a portion of the takings. The result? Sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings enacted by parliaments is that this clause has been inserted – absent public approval, and often in a climate of total confidentiality – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, activists secured a significant win at the High Court. The justice found that plans to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The Labour government later cancelled the licence the previous administration had granted. Today, this victory could be compromised by an foreign court answering to only the companies bringing the case.

In August, a company whose final controllers are located in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this might be. Which individual is representing it in opposition to the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The administration makes a decision, the domestic court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Case

On the same day that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it appears probable that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him after the Russian aggression. He has already filed a claim against another European state with similar intent, claiming sixteen billion dollars: an amount representing half government’s yearly income. Included in the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized state funds as collateral for its financial support package is due to concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that such things were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “alarmism … in reality, 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 power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. Recently, energy and resource corporations have filed a unprecedented number of claims against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP