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What is your reckon our system of government operates? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Legislation is maintained by the courts. End of story. However, that used to be how it operated in the past. No longer.

The Advent of Secret Tribunals

Today, overseas companies, along with the wealthy individuals that control them, can sue nation states for the regulations they pass, at private courts composed of commercial attorneys. The cases take place behind closed doors. Differing from national judiciaries, these tribunals grant no right of appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including businesses operating from this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums represent not actual losses but money the tribunal officials determine the company might otherwise have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws along the same lines, worried about being sued.

A System Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies learn from each other, and private equity finance suits in return for a cut of the awards. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices made by legislatures is that this clause has been written – without democratic mandate, and typically amid an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on national carbon targets. The incoming administration then withdrew the permission the Tories had approved. Currently, this success faces being overturned by an foreign court accountable to exclusively the entities petitioning it.

In August, a company whose beneficial owners reside in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. We have no idea how much this sum represents. Which individual is representing it challenging the British government? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company contests it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, seeking a colossal sum: half that nation's yearly budget. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this topic accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies grasp the influence they now possess, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, energy and resource corporations have lodged a historic level of suits against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP