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What is your reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that was how it once functioned. No longer.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, along with the oligarchs who own them, can sue nation states for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are held in secret. Unlike our courts, these bodies grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even companies operating from this country. The door is open solely for entities registered abroad.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but money the panel members decide the company would perhaps have made. The administration might be compelled to abandon its policy. It becomes hesitant to enacting future policies of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being brought, as corporations observe each other, and investment funds finance suits for a share of a share of the awards. The outcome? National sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – inside international trade agreements.

A Concrete Example: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The judge found that schemes to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the permission the former government had granted. Today, this legal outcome could be compromised by an foreign court answering to only the corporations bringing the case.

In August, a corporate entity whose final controllers reside in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. The public has no idea how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The government makes a decision, the domestic court supports it, then a foreign company contests it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case to date, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK levied against him following the invasion of Ukraine. He has previously started suing another European state with similar intent, claiming a colossal sum: half that nation's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, 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 problem in the past.” A consultant on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That threat is now a reality. This year, fossil fuel and mining firms have initiated a historic level of claims against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Firms have to date won vast sums via ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP