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What is your perceive our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Emergence of Offshore Courts

Today, foreign corporations, along with the oligarchs who own them, can sue governments for the policies they pass, at private courts made up of business advocates. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, including companies operating from this country. The door is open exclusively to entities operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These awards are based not on tangible damages but funds the arbitrators determine the company could potentially have made. The administration may have to drop the legislation. It is discouraged from passing future laws of a similar nature, worried about facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being brought, as companies learn from each other, and investment funds fund legal actions for a share of a cut of the settlements. The outcome? National sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the decisions enacted by elected bodies is that this provision has been inserted – without public consent, and often in an atmosphere of extreme secrecy – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The judge found that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The new government then withdrew the permission the former government had granted. Today, this legal outcome could be compromised by an offshore tribunal reporting to exclusively the companies petitioning it.

During August, a company whose final controllers are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had received permission to proceed. We have little idea how much this might be. Who is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a international entity challenges it through an secretive offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the panel on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has filed a claim against Luxembourg with similar intent, demanding $16bn: equivalent to half of government’s annual revenue. Included in the legal team on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that such things were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Predictions that “when companies begin to understand the power they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. This year, energy and resource corporations have filed a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP