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What is your reckon our democratic process functions? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Advent of Offshore Courts

Today, overseas companies, and the billionaires that control them, have the power to sue nation states for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, including enterprises based in this country. The door is open exclusively to businesses registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company might otherwise have made. The state might be compelled to rescind the measure. It will be deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being filed, as corporations observe each other, and investment funds fund legal actions for a share of a portion of the takings. The result? Democratic sovereignty and democracy are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices made by legislatures is that this stipulation has been written – absent public approval, and typically amid a climate of extreme secrecy – into trade treaties.

A Specific Example: The UK Coal Mine

A year ago, a conservation group secured a significant win at the High Court. The judge found that proposals to excavate the first major coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The new government later cancelled the permission the former government had issued. Today, this success could be compromised by an foreign court reporting to only the entities petitioning it.

Last August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a tribunal in the United States was established to consider the case.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have no clear indication how much this could amount to. Who is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The administration enacts a policy, the domestic court upholds it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, it was revealed from a parliamentary answer 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 arbitration process to contest the penalties the UK levied against him after the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of nation's yearly income. Among the lawyers representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that such things were not possible. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations grasp the authority bestowed upon them, they will turn their attention from the poorer states to the strong ones” were greeted by widespread derision.

That warning is now a reality. Recently, fossil fuel and mining firms have lodged a historic level of suits against nations rich and poor, opposing – like the example of the Whitehaven project – government attempts to stop climate breakdown. Corporations have thus far won vast sums by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP