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What is your reckon our system of government operates? Maybe similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Advent of Secret Arbitration Panels

Nowadays, overseas companies, or the billionaires who own them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including enterprises based in this country. They are open only to corporations based overseas.

When a secret court determines that a law or policy might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, potentially billions.

These awards constitute not tangible damages but funds the panel members determine the company could potentially have made. The administration could be forced to abandon its policy. It will be deterred from enacting future policies along the same lines, for fear of facing litigation.

A System Running Rampant

Record numbers of cases are being brought, as firms observe each other, and investment funds fund legal actions in exchange for a portion of the takings. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions taken by elected bodies is that this stipulation has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The judge found that plans to open the first deep coalmine in the UK for three decades, in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government later cancelled the consent the former government had issued. Currently, this success faces being overturned by an offshore tribunal accountable to only the corporations filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was set up to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The government makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the sanctions the UK enacted against him following the Russian aggression. He has initiated proceedings against Luxembourg with similar intent, claiming $16bn: an amount representing half government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s delay in using frozen Russian assets as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Threats

The public was told that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” A consultant on this matter labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “as corporations begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has come to pass. Recently, oil and gas and resource corporations have filed a record number of cases against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have so far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP