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Can you perceive our democratic process functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills become law. The law is upheld by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Emergence of Offshore Courts

Nowadays, foreign corporations, along with the billionaires that control them, can sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases are held in secret. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, even billions.

This compensation are based not on actual losses but money the panel members decide the company would perhaps have made. The government may have to rescind the measure. It is discouraged from passing future laws of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Record numbers of cases are being initiated, as corporations learn from each other, and private equity fund legal actions in return for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the rulings enacted by elected bodies is that this clause has been written – absent public approval, and frequently under an atmosphere of total confidentiality – inside trade treaties.

A Real-World Instance: The Cumbrian Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The judge found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government later cancelled the consent the previous administration had granted. Today, this legal outcome is under threat by an foreign court accountable to no one but the companies petitioning it.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have little idea how much this could amount to. Who is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The administration makes a decision, the high court validates it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it seems likely that he’ll use the tribunal to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, demanding $16bn: equivalent to half of government’s annual revenue. Included in the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told that such things could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An adviser on this issue labelled activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms grasp the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That prediction has now materialised. In the current period, oil and gas and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – as in the case of the UK mine – state efforts to halt environmental catastrophe. Companies have so far won $114bn by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP