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Can you understand 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 pass into law. Statutes is maintained by the courts. End of story. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Courts

Nowadays, foreign corporations, along with the oligarchs behind them, can sue nation states for the laws they pass, at secret arbitration panels staffed by business advocates. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions, even billions.

These sums are based not on actual losses but money the tribunal officials decide the company might otherwise have made. The administration may have to rescind the measure. It will be discouraged from introducing similar legislation of a similar nature, worried about being sued.

A System Spiralling Out of Control

Record numbers of cases are being initiated, as firms learn from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? National sovereignty and democracy are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices enacted by legislatures is that this clause has been incorporated – without democratic mandate, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the licence the previous administration had approved. Now, this success faces being overturned by an secret arbitration panel accountable to only the companies bringing the case.

Last August, a firm whose ultimate owners are located in the tax haven filed a lawsuit challenging the UK government. The previous week a tribunal in the US capital was convened to consider the case.

This firm is suing the UK for the money it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. Who is representing it in opposition to the British government? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Case

Concurrently that the court on the coal mine dispute was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he may employ the tribunal to contest the sanctions the UK imposed on him following the invasion of Ukraine. He has already started suing Luxembourg for this reason, seeking sixteen billion dollars: half that nation's yearly budget. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue accused campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies begin to understand the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That warning has now materialised. In the current period, oil and gas and extraction companies have lodged a historic level of cases against nations rich and poor, opposing – like the example of the Cumbrian coalmine – official measures to prevent global warming. Companies have to date won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP