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How do you understand our system of government works? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Rise of Secret Arbitration Panels

Today, international firms, or the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels allow no avenue for appeal or legal review. The general public cannot take a case to them, just as our government, including enterprises operating from this country. The door is open solely for entities registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but funds the arbitrators conclude the company could potentially have made. The administration may have to abandon its policy. It becomes hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being brought, as firms observe each other, and private equity finance suits for a share of a cut of the settlements. The result? Democratic sovereignty and democratic governance are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the rulings enacted by elected bodies is that this stipulation has been incorporated – without public consent, and often in conditions of profound opacity – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer found that plans to open the first deep coalmine in the UK for 30 years, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration subsequently revoked the licence the Tories had granted. Currently, this victory is under threat by an foreign court answering to exclusively the corporations petitioning it.

During August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in the US capital was convened to consider the case.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to proceed. The public has no clear indication how much this might be. Who is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Challenge

On the same day that the court on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has started suing Luxembourg on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Included in the lawyers acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s procrastination in using frozen Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Costs

Politicians promised that such things could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this matter labelled critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Warnings that “once firms begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by widespread derision.

That prediction has now materialised. In the current period, fossil fuel and mining firms have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to prevent global warming. Corporations have thus far won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP