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Can you perceive our democratic process operates? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. End of story. Well, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Courts

In the modern era, international firms, or the wealthy individuals that control them, can sue governments for the laws they pass, at private courts made up of business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these tribunals allow no right of appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to corporations registered abroad.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but money the tribunal officials determine the company could potentially have made. The administration may have to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, worried about being sued.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in return for a share of the awards. The outcome? National sovereignty and democratic governance are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in conditions of profound opacity – inside trade treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer found that schemes to dig the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the consent the previous administration had granted. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the companies petitioning it.

Last August, a company whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. The previous week a arbitration panel in Washington DC was established 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 commence operations. Citizens have no idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a foreign company contests it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Case

Concurrently that the court on the mining lawsuit was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the lawyers on his side? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

The public was told that such things wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this topic labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “as corporations grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. Recently, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – official measures to prevent global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP