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What is your reckon our system of government works? Perhaps something like this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Advent of Secret Courts

In the modern era, overseas companies, along with the billionaires that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for businesses registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These sums constitute not real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The state might be compelled to drop the legislation. It is deterred from enacting future policies of a similar nature, worried about being sued.

A System Running Rampant

Record numbers of legal actions are being filed, as corporations observe each other, and hedge funds finance suits in return for a portion of the awards. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings made by elected bodies is that this clause has been inserted – without public consent, and often in conditions of total confidentiality – inside bilateral investment treaties.

A Specific Case: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice found that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the questionable argument that the mine could have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had granted. Now, this success faces being overturned by an foreign court accountable to only the companies petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The claimant is suing the UK for the money it could have earned if the mine had received permission to proceed. The public has little idea how much this might be. What legal team is representing it challenging the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company challenges it through an undemocratic private court, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he’ll use the arbitration process to contest the penalties the UK enacted against him following the Russian aggression. He has previously started suing another European state for this reason, claiming $16bn: half that government’s yearly budget. Part of the lawyers representing him there? Cherie Blair, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Risks

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue accused critics of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning is now a reality. In the current period, oil and gas and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have thus far won $114bn through ISDS, of which oil majors have secured the majority. That represents the combined GDP