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Can you perceive our system of government functions? It could be along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. The law is upheld by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Secret Courts

Nowadays, foreign corporations, and the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these panels grant no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even companies operating from this country. They are open solely for businesses registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s projected profits, it may order compensation of vast sums, potentially billions.

These awards represent not actual losses but compensation the tribunal officials determine the company would perhaps have made. The state may have to abandon its policy. It is hesitant to passing future laws in that area, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms take cues from each other, and investment funds finance suits in return for a cut of the takings. The result? Sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings enacted by parliaments is that this clause has been written – without democratic mandate, and typically amid a climate of profound opacity – into bilateral investment treaties.

A Specific Case: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the high court. The judge determined that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the consent the Tories had issued. Now, this victory is under threat by an foreign court answering to no one but the entities bringing the case.

Last August, a corporate entity whose final controllers are based in the offshore financial centre lodged a claim challenging the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. The public has little idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are scarce of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has filed a claim against Luxembourg with similar intent, demanding a colossal sum: an amount representing half government’s annual revenue. Among the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over sovereign states might be preventing the funds Ukraine critically depends on.

False Assurances and Mounting Threats

The public was told that these events could not occur. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this issue described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were greeted by scepticism.

That threat has now materialised. In the current period, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to prevent climate breakdown. Firms have to date won $114bn by using ISDS, of which oil majors have secured the majority. That represents the combined GDP