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What is your reckon our system of government works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. That's it. However, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, overseas companies, along with the oligarchs that control them, can sue governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but money the panel members conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes hesitant to passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and investment funds finance suits for a share of a portion of the takings. The consequence? National sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the rulings taken by parliaments is that this clause has been written – absent public approval, and often in a climate of total confidentiality – within international trade agreements.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge determined that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The incoming administration then withdrew the permission the former government had granted. Now, this victory faces being overturned by an secret arbitration panel reporting to no one but the companies petitioning it.

Last August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in the United States was set up to hear it.

This firm is seeking compensation from 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 UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a foreign company contests it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Challenge

Simultaneously that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him following the invasion of Ukraine. He has started suing Luxembourg for this reason, demanding a colossal sum: half that government’s annual revenue. Included in the counsel representing him there? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

Politicians promised that such things could not occur. Years ago, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this matter labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That prediction is now a reality. This year, energy and resource corporations have filed a record number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – official measures to prevent global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP