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Can you perceive our system of government operates? Maybe similar to this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Courts

Nowadays, international firms, or the oligarchs who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes take place behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even businesses operating from this country. They are open solely for entities based overseas.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but money the panel members conclude the company might otherwise have made. The administration might be compelled to abandon its policy. It is deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being brought, as companies take cues from each other, and investment funds finance suits in return for a share of the settlements. The outcome? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings taken by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of profound opacity – inside trade treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice found that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on national carbon targets. The incoming administration subsequently revoked the consent the former government had issued. Now, this success is under threat by an offshore tribunal accountable to no one but the companies filing the suit.

Last August, a company whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. The public has no idea how much this might be. What legal team is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK levied against him following the war in Ukraine. He has previously started suing another European state on these grounds, claiming sixteen billion dollars: equivalent to half of government’s annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as collateral 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, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that these events were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, told us: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An expert on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies start to realise the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning is now a reality. Recently, oil and gas and resource corporations have filed a unprecedented number of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP