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How do you perceive our system of government operates? Perhaps something like this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. However, that was how it used to work. No longer.

The Advent of Secret Tribunals

Today, foreign corporations, or the oligarchs behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even companies operating from this country. The door is open only to entities operating from foreign soil.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it can award compensation of vast sums, potentially billions.

This compensation represent not real financial harm but compensation the arbitrators decide the company would perhaps have made. The government might be compelled to abandon its policy. It will be hesitant to enacting future policies along the same lines, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as companies observe each other, and investment funds bankroll lawsuits in return for a share of the awards. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override domestic law and the decisions enacted by elected bodies is that this stipulation has been written – absent public approval, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The judge found that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The incoming administration then withdrew the licence the previous administration had granted. Today, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the entities filing the suit.

Last August, a firm whose final controllers are based in the Cayman Islands filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was established to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has little idea how much this sum represents. What legal team is representing it against the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he’ll use the tribunal to contest the penalties the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming $16bn: an amount representing half government’s annual revenue. Included in the counsel representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as security for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that such things were not possible. Years ago, a senior politician, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations had to worry about these lawsuits. Warnings that “once firms begin to understand the influence they now possess, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. In the current period, oil and gas and extraction companies have initiated a historic level of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to halt global warming. Companies have to date won vast sums via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP