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What is your reckon our system of government functions? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills become law. The law is upheld by the courts. End of story. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Secret Tribunals

Nowadays, foreign corporations, along with the wealthy individuals who own them, are able to litigate against nation states for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these panels grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. The door is open solely for businesses operating from foreign soil.

If a tribunal determines that a government measure might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

This compensation are based not on real financial harm but money the tribunal officials determine the company could potentially have made. The government might be compelled to rescind the measure. It becomes discouraged from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms observe each other, and hedge funds finance suits for a share of a share of the awards. The consequence? Democratic sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings taken by legislatures is that this clause has been written – without democratic mandate, and often in a climate of total confidentiality – into trade treaties.

A Specific Instance: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the senior court. The presiding officer determined that schemes to open the first new deep coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had granted. Currently, this legal outcome faces being overturned by an foreign court answering to only the entities petitioning it.

In August, a firm whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the United States was set up to consider the case.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. We have little idea how much this could amount to. What legal team is representing it against the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation for this reason, seeking $16bn: half that nation's annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that such things could not occur. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and there has not been a case in the past.” A consultant on this topic accused activists of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations begin to understand the power bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That prediction has come to pass. This year, fossil fuel and extraction companies have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have to date won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP