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What is your understand our system of government works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Rise of Secret Courts

Nowadays, overseas companies, and the billionaires who own them, can sue elected administrations for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even businesses headquartered in this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, potentially billions.

These awards are based not on tangible damages but compensation the tribunal officials decide the company could potentially have made. The administration could be forced to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, worried about facing litigation.

A Mechanism Running Rampant

Unprecedented levels of disputes are being brought, as firms observe each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The result? National sovereignty and democracy are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices taken by legislatures is that this stipulation has been incorporated – without public consent, and typically amid a climate of profound opacity – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have no consequence on national carbon targets. The new government then withdrew the licence the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel reporting to exclusively the corporations bringing the case.

In August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the US capital was convened to consider the case.

This firm is suing the UK for the money it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK enacted against him after the Russian aggression. He has previously initiated proceedings against a small nation for this reason, seeking $16bn: an amount representing half nation's yearly budget. Among the lawyers on his side? Cherie Blair, married to the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that these events wouldn’t happen. Years ago, a senior politician, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a case in the past.” An expert on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about such legal actions. Predictions that “once firms begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction is now a reality. In the current period, oil and gas and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have so far won $114bn via ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP