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Can you reckon our democratic process functions? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law is upheld by the courts. End of story. Yet, that’s how it used to work. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, along with the wealthy individuals who own them, can sue elected administrations for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies headquartered in this country. The door is open solely for businesses registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

These sums represent not actual losses but funds the tribunal officials decide the company might otherwise have made. The government may have to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and private equity finance suits in exchange for a portion of the awards. The consequence? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, environmental campaigners secured a significant win at the high court. The justice ruled that plans to open the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the permission the former government had approved. Today, this success could be compromised by an foreign court accountable to no one but the companies filing the suit.

During August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the profits it might have made if the mine had received permission to proceed. Citizens have no idea how much this could amount to. What legal team is serving as its counsel challenging the state? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case so far, but it seems likely that he may employ the tribunal to fight the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Part of the counsel on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

We were assured that such things could not occur. Previously, a government leader, championing the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this issue described campaigners of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “when companies begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations rich and poor, opposing – like the example of the Whitehaven project – official measures to stop global warming. Companies have to date won $114bn via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP