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Can you perceive our system of government works? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. The law are enforced by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Emergence of Secret Tribunals

In the modern era, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these bodies allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. They are open only to corporations operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

These sums represent not tangible damages but money the arbitrators decide the company might otherwise have made. The government could be forced to rescind the measure. It will be hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being filed, as firms learn from each other, and private equity finance suits for a share of a share of the awards. The consequence? Sovereignty and democratic governance are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices enacted by parliaments is that this clause has been inserted – without democratic mandate, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The justice found that schemes to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no impact on national carbon targets. The new government subsequently revoked the consent the former government had approved. Today, this success is under threat by an offshore tribunal reporting to exclusively the entities petitioning it.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a tribunal in the United States was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had received permission to go ahead. We have no clear indication how much this could amount to. What legal team is acting on its behalf challenging the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The administration passes a law, the high court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has started suing Luxembourg on these grounds, seeking $16bn: half that government’s yearly income. Part of the counsel on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that these scenarios were not possible. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this issue described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries had to worry about ISDS claims. Predictions that “once firms grasp the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That threat has come to pass. In the current period, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to halt environmental catastrophe. Companies have so far won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP