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Can you perceive our system of government operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, overseas companies, and the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, including enterprises operating from this country. The door is open only to businesses operating from foreign soil.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

These awards constitute not actual losses but compensation the arbitrators determine the company might otherwise have made. The state could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, due to the risk of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as firms observe each other, and investment funds bankroll lawsuits in exchange for a cut of the awards. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions enacted by parliaments is that this stipulation has been inserted – without public consent, and frequently under a climate of total confidentiality – into international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government then withdrew the consent the former government had approved. Now, this legal outcome faces being overturned by an foreign court reporting to only the companies bringing the case.

During August, a corporate entity whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the United States was set up to hear it.

This firm is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Who is serving as its counsel challenging the state? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration enacts a policy, the domestic court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he’ll use the arbitration process to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has already filed a claim against another European state for this reason, seeking $16bn: equivalent to half of state's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

Politicians promised that such things could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this issue labelled critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That prediction has come to pass. This year, oil and gas and resource corporations have lodged a historic level of cases against nations rich and poor, contesting – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have thus far won $114bn by using ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP