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Can you perceive our system of government operates? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Advent of Secret Tribunals

Nowadays, international firms, or the oligarchs behind them, can sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted in secret. Unlike our courts, these bodies provide no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, including enterprises operating from this country. Access is granted exclusively to businesses registered abroad.

When a secret court rules that a law or policy could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The government might be compelled to drop the legislation. It will be hesitant to enacting future policies in that area, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as firms learn from each other, and investment funds fund legal actions for a share of a share of the takings. The result? Sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions taken by legislatures is that this clause has been written – without democratic mandate, and frequently under a climate of total confidentiality – within trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The incoming administration then withdrew the permission the previous administration had issued. Currently, this success is under threat by an offshore tribunal reporting to no one but the corporations filing the suit.

Last August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to go ahead. The public has no idea how much this sum represents. Who is serving as its counsel against the British government? An elected representative, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The government passes a law, the high court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it seems likely that he will utilise the tribunal to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already filed a claim against Luxembourg on these grounds, demanding a colossal sum: half that state's annual revenue. Included in the counsel on his side? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in utilising seized state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that these events were not possible. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this topic accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms begin to understand the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That prediction has come to pass. Recently, fossil fuel and mining firms have filed a unprecedented number of suits against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop global warming. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP