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Can you reckon our democratic process works? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Nowadays, international firms, and the oligarchs that control them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even companies headquartered in this country. They are open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The government could be forced to abandon its policy. It will be hesitant to passing future laws along the same lines, for fear of being sued.

A Process Growing Exponentially

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

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of total confidentiality – into international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the senior court. The presiding officer ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The new government then withdrew the permission the former government had issued. Now, this success could be compromised by an foreign court accountable to exclusively the companies bringing the case.

Last August, a company whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no idea how much this sum represents. What legal team is representing it in opposition to the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a international entity challenges it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case so far, but it appears probable that he will utilise the tribunal to contest the penalties the UK levied against him after the Russian aggression. He has filed a claim against a small nation for this reason, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Included in the counsel representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen Russian assets 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 remarkable, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that these events were not possible. Previously, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this issue accused critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “as corporations start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That prediction has come to pass. Recently, fossil fuel and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the UK mine – official measures to prevent environmental catastrophe. Companies have to date won vast sums by using ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP