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How do you perceive our system of government functions? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Secret Courts

Today, foreign corporations, or the billionaires that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these panels provide no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. The door is open exclusively to corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation represent not actual losses but money the panel members conclude the company would perhaps have made. The government could be forced to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a share of the awards. The result? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under a climate of total confidentiality – inside trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have zero effect on our carbon budgets. The incoming administration then withdrew the licence the former government had issued. Now, this success is under threat by an secret arbitration panel accountable to no one but the corporations filing the suit.

In August, a corporate entity whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to proceed. We have little idea how much this could amount to. What legal team is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that state's yearly income. Included in the counsel representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that such things wouldn’t happen. In 2014, a former prime minister, promoting the most significant and hazardous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue accused critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were met with widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have initiated a record number of claims against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt global warming. Companies have to date won $114bn through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP