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Can you understand our political system functions? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Yet, that’s how it operated in the past. Not anymore.

The Advent of Secret Courts

In the modern era, foreign corporations, and the wealthy individuals that control them, can sue governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for businesses based overseas.

When a secret court determines that a legislative action could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These awards represent not actual losses but money the arbitrators decide the company might otherwise have made. The government may have to rescind the measure. It is deterred from passing future laws along the same lines, for fear of being sued.

A System Running Rampant

Unprecedented levels of disputes are being filed, as firms learn from each other, and private equity finance suits in exchange for a share of the takings. The result? Democratic sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the rulings made by parliaments is that this provision has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge ruled that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the consent the Tories had approved. Currently, this victory faces being overturned by an offshore tribunal answering to no one but the companies bringing the case.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

This firm is suing the UK for the money it could have earned if the mine had received permission to commence operations. The public has little idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it seems likely that he will utilise the ISDS mechanism to fight the restrictions the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation for this reason, demanding a colossal sum: an amount representing half nation's yearly income. Included in the lawyers representing him there? a prominent lawyer, wife of the previous PM.

International law scholars believe that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An expert on this topic described activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations begin to understand the influence they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. This year, oil and gas and mining firms have lodged a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – government attempts to prevent environmental catastrophe. Firms have so far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP