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How do you reckon our system of government functions? Maybe something like this. We elect MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. However, that was how it once functioned. Those days are over.

The Advent of Secret Courts

Today, international firms, along with the oligarchs that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These sums are based not on actual losses but funds the arbitrators decide the company might otherwise have made. The administration may have to abandon its policy. It becomes hesitant to passing future laws in that area, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and hedge funds fund legal actions in exchange for a portion of the takings. The outcome? Democratic 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 parliaments is that this provision has been incorporated – absent public approval, and typically amid a climate of profound opacity – inside international trade agreements.

A Specific Example: The UK Coal Mine

Twelve months ago, activists secured a significant win at the high court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Currently, this success is under threat by an secret arbitration panel reporting to only the corporations petitioning it.

Last August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit against the UK government. Recently a tribunal in Washington DC was established to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. What legal team is acting on its behalf challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a international entity contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has filed a claim against a small nation on these grounds, demanding sixteen billion dollars: half that government’s yearly budget. Included in the legal team representing him there? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that such things wouldn’t happen. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this topic labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations grasp the power they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That warning is now a reality. In the current period, oil and gas and resource corporations have lodged a record number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – official measures to stop global warming. Firms have thus far won $114bn via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP