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What is your reckon our system of government operates? Maybe something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, or the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these panels grant no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including businesses headquartered in this country. The door is open only to entities operating from foreign soil.

When a secret court determines that a government measure might diminish the corporation’s projected profits, it can award compensation of vast sums, running into billions.

These awards are based not on tangible damages but compensation the tribunal officials decide the company might otherwise have made. The government might be compelled to rescind the measure. It will be discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of legal actions are being brought, as companies observe each other, and private equity finance suits in return for a portion of the takings. The result? National sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the choices enacted by legislatures is that this provision has been inserted – without public consent, and often in conditions of extreme secrecy – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the previous administration had granted. Currently, this legal outcome is under threat by an foreign court reporting to exclusively the companies petitioning it.

During August, a firm whose final controllers are based in the tax haven filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

This firm is litigating against the UK for the money it could have earned if the mine had received permission to proceed. The public has no idea how much this could amount to. What legal team is representing it in opposition to the state? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court validates it, then a foreign company challenges it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

Concurrently that the court on the coal mine dispute was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously started suing another European state with similar intent, claiming $16bn: half that state's yearly budget. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as security for its loan to Ukraine is due to 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 sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Mounting Costs

We were assured that these scenarios could not occur. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, told us: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An expert on this issue labelled critics of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That threat is now a reality. Recently, energy and mining firms have lodged a historic level of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured the majority. That equates to the combined GDP