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Can you reckon our system of government functions? Maybe something like this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. That's it. However, that was how it once functioned. No longer.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, and the wealthy individuals that control them, have the power to sue governments for the policies they pass, at private courts composed of corporate lawyers. The cases take place in secret. Differing from national judiciaries, these panels provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted solely for entities based overseas.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but compensation the tribunal officials decide the company would perhaps have made. The state could be forced to drop the legislation. It is discouraged from passing future laws along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being initiated, as firms observe each other, and investment funds finance suits for a share of a cut of the settlements. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices enacted by legislatures is that this stipulation has been incorporated – without public consent, and often in conditions of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, activists secured a significant win at the high 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 outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on national carbon targets. The Labour government then withdrew the permission the previous administration had issued. Currently, this success is under threat by an foreign court reporting to only the entities bringing the case.

Last August, a company whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no idea how much this might be. Which individual is representing it against the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he may employ the tribunal to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: equivalent to half of government’s annual revenue. Included in the legal team on his side? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s hesitation in using frozen state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that such things wouldn’t happen. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An expert on this matter accused critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the influence they now possess, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That warning has now materialised. In the current period, oil and gas and extraction companies have initiated a historic level of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Corporations have so far won $114bn by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP