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How do you understand our system of government functions? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Advent of Secret Tribunals

In the modern era, overseas companies, along with the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts composed of corporate lawyers. The cases take place behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, including businesses operating from this country. Access is granted exclusively to businesses registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of vast sums, even billions.

These sums constitute not real financial harm but funds the tribunal officials conclude the company could potentially have made. The administration might be compelled to abandon its policy. It will be deterred from enacting future policies along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being filed, as firms learn from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions made by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in conditions of extreme secrecy – within trade treaties.

A Specific Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The justice determined that schemes to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The new government then withdrew the permission the former government had approved. Now, this success faces being overturned by an secret arbitration panel answering to no one but the corporations bringing the case.

During August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings versus the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

This firm is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. We have little idea how much this could amount to. Who is representing it against the UK administration? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary supports it, then a international entity contests it through an secretive offshore tribunal, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him following the war in Ukraine. He has previously started suing a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Included in the legal team on his side? Cherie Blair, spouse of the previous PM.

International law scholars contend that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Growing Threats

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic labelled critics of “alarmism … in reality, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations should be concerned by such legal actions. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were met with scepticism.

That threat has now materialised. Recently, energy and resource corporations have lodged a record number of cases against nations across the economic spectrum, opposing – as in the case of the UK mine – official measures to stop climate breakdown. Firms have thus far won $114bn via ISDS, of which oil majors have secured the majority. That equates to the combined GDP