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How do you reckon our system of government works? Perhaps something like this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Emergence of Secret Courts

In the modern era, international firms, along with the oligarchs that control them, have the power to sue elected administrations for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. The door is open only to businesses based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

These sums represent not tangible damages but money the tribunal officials conclude the company could potentially have made. The government might be compelled to drop the legislation. It is hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in return for a share of the takings. The result? Democratic sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions enacted by legislatures is that this clause has been incorporated – without public consent, and often in an atmosphere of total confidentiality – within trade treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists secured a significant win at the High Court. The justice found that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the permission the Tories had granted. Now, this victory is under threat by an foreign court reporting to exclusively the companies petitioning it.

Last August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. We have no clear indication how much this might be. What legal team is acting on its behalf in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he may employ the tribunal to contest the restrictions the UK imposed on him following the Russian aggression. He has started suing a small nation for this reason, demanding sixteen billion dollars: an amount representing half state's yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine urgently requires.

Misleading Claims and Growing Risks

We were assured that these events could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has never been a case in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the power they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That prediction has now materialised. Recently, energy and resource corporations have initiated a record number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP