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What is your perceive our system of government operates? Maybe along the lines of this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Secret Arbitration Panels

Today, overseas companies, along with the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at private courts composed of business advocates. These proceedings are held in secret. Unlike our courts, these bodies grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, potentially billions.

These awards represent not tangible damages but compensation the arbitrators decide the company might otherwise have made. The government may have to drop the legislation. It is discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Record numbers of disputes are being filed, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The consequence? Sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions taken by elected bodies is that this clause has been incorporated – absent public approval, and typically amid a climate of total confidentiality – within trade treaties.

A Specific Example: The Cumbrian Coalmine

Last year, a conservation group secured a significant win at the senior court. The justice ruled that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government subsequently revoked the licence the previous administration had issued. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies filing the suit.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the money it could have earned if the mine had received permission to proceed. We have no idea how much this could amount to. What legal team is representing it challenging the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case to date, but it appears probable that he’ll use the tribunal to challenge the penalties the UK levied against him following the invasion of Ukraine. He has previously started suing Luxembourg with similar intent, claiming sixteen billion dollars: equivalent to half of government’s yearly income. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

The public was told that these scenarios were not possible. Years ago, a senior politician, promoting the biggest and most dangerous of all these agreements, declared: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “once firms start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That warning has now materialised. Recently, energy and resource corporations have lodged a historic level of suits against nations rich and poor, challenging – as in the case of the UK mine – official measures to stop global warming. Firms have to date won vast sums by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP