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Can you reckon our political system functions? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. End of story. However, that was how it used to work. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, and the wealthy individuals who own them, can sue nation states for the laws they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted in secret. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards represent not real financial harm but funds the tribunal officials conclude the company might otherwise have made. The government could be forced to rescind the measure. It becomes deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The consequence? Sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the decisions made by parliaments is that this clause has been written – absent public approval, and often in an atmosphere of total confidentiality – into international trade agreements.

A Specific Example: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the High Court. The judge ruled that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had approved. Now, this victory faces being overturned by an foreign court reporting to no one but the companies bringing the case.

During August, a corporate entity whose final controllers are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was established to hear it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. The public has little idea how much this might be. Which individual is acting on its behalf against the UK administration? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a overseas corporation disputes it through an undemocratic private court, and a member of our parliament acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK levied against him following the Russian aggression. He has previously filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that state's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. Previously, a government leader, promoting the largest and riskiest of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” An expert on this issue accused critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has now materialised. In the current period, energy and mining firms have filed a record number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have to date won $114bn through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP