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Can you reckon our system of government works? It could be something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Emergence of Secret Arbitration Panels

Today, overseas companies, and the oligarchs behind them, can sue governments for the policies they pass, at offshore tribunals made up of business advocates. The cases take place away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. They are open solely for corporations registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but money the arbitrators determine the company might otherwise have made. The administration may have to rescind the measure. It is discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being brought, as firms take cues from each other, and investment funds finance suits in return for a cut of the takings. The result? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the choices made by legislatures is that this provision has been incorporated – absent public approval, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Specific Instance: The UK Coal Mine

A year ago, activists secured a significant win at the senior court. The presiding officer found that plans to open the first new deep coal mine in the UK for a generation, in northwest England, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have no consequence on climate commitments. The incoming administration later cancelled the consent the Tories had granted. Currently, this success could be compromised by an foreign court answering to no one but the corporations bringing the case.

Last August, a company whose ultimate owners are located in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was established to consider the case.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Which individual is representing it in opposition to the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration passes a law, the high court supports it, then a international entity challenges it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it appears probable that he will utilise the tribunal to fight the sanctions the UK levied against him following the war in Ukraine. He has filed a claim against Luxembourg with similar intent, demanding $16bn: an amount representing half nation's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that such things wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all such treaties, declared: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this topic accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That prediction is now a reality. This year, energy and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won $114bn by using ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP