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Can you understand our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. Yet, that used to be how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Today, foreign corporations, along with the billionaires who own them, are able to litigate against governments for the regulations they pass, at private courts staffed by commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these panels grant no right of appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These sums constitute not tangible damages but money the arbitrators conclude the company might otherwise have made. The administration might be compelled to drop the legislation. It will be discouraged from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of legal actions are being brought, as firms take cues from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The outcome? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions enacted by elected bodies is that this provision has been inserted – without public consent, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, activists won a great victory at the senior court. The presiding officer found that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government later cancelled the licence the former government had granted. Today, this legal outcome is under threat by an foreign court reporting to only the entities filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in the United States was established to consider the case.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a international entity challenges it through an secretive private court, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case at present, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK imposed on him following the war in Ukraine. He has already initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: equivalent to half of state's annual revenue. Part of the lawyers representing him there? Cherie Blair, wife of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen state funds as security for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that such things could not occur. Previously, a former prime minister, championing the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this issue labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That prediction is now a reality. This year, fossil fuel and extraction companies have lodged a historic level of suits against nations across the economic spectrum, contesting – like the example of the UK mine – state efforts to stop environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP