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Can you perceive our system of government functions? Maybe something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Emergence of Secret Courts

Nowadays, international firms, along with the billionaires behind them, can sue nation states for the policies they pass, at private courts composed of corporate lawyers. The cases take place in secret. Unlike our courts, these panels allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open solely for corporations operating from foreign soil.

If a tribunal rules that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, running into billions.

This compensation constitute not tangible damages but money the arbitrators determine the company would perhaps have made. The administration may have to drop the legislation. It becomes deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the awards. The outcome? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the rulings made by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the senior court. The judge found that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine could have no impact on national carbon targets. The new government then withdrew the permission the previous administration had approved. Currently, this success could be compromised by an secret arbitration panel accountable to no one but the companies petitioning it.

In August, a company whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. Recently a dispute settlement body in the United States was set up to hear it.

The company is suing the UK for the revenue it might have made if the mine had been permitted to go ahead. We have little idea how much this might be. What legal team is representing it against the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the panel on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case to date, but it is highly possible that he may employ the arbitration process to fight the penalties the UK imposed on him after the war in Ukraine. He has already filed a claim against Luxembourg for this reason, claiming a colossal sum: half that government’s yearly budget. Part of the lawyers on his side? the wife of a former prime minister, married to the ex-UK leader.

International law scholars contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that such things were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” A consultant on this issue labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning has now materialised. In the current period, energy and mining firms have initiated a record number of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent climate breakdown. Companies have so far won vast sums by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP