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How do you perceive our system of government operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. No longer.

The Rise of Secret Courts

Today, international firms, or the wealthy individuals behind them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, including companies operating from this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These sums represent not real financial harm but funds the arbitrators determine the company would perhaps have made. The administration could be forced to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The consequence? National sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions taken by parliaments is that this stipulation has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the high court. The judge ruled that plans to open the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the consent the Tories had approved. Now, this victory faces being overturned by an secret arbitration panel reporting to only the corporations petitioning it.

Last August, a firm whose final controllers are based in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was set up to hear it.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. What legal team is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case at present, but it seems likely that he may employ the arbitration process to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has already initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly budget. Among the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Growing Costs

We were assured that such things could not occur. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this topic accused campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms start to realise the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That threat has now materialised. In the current period, oil and gas and extraction companies have filed a historic level of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to halt global warming. Companies have so far won vast sums via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP