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Can you understand our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Today, foreign corporations, and the billionaires who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted in secret. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including businesses headquartered in this country. Access is granted solely for entities operating from foreign soil.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but funds the panel members determine the company could potentially have made. The state could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, worried about being sued.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies learn from each other, and private equity finance suits in exchange for a share of the settlements. The consequence? Democratic sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the high court. The judge found that plans to dig the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration later cancelled the licence the former government had granted. Now, this success could be compromised by an offshore tribunal reporting to exclusively the corporations bringing the case.

During August, a company whose final controllers are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the money it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. What legal team is representing it in opposition to the British government? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The government passes a law, the domestic court upholds it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it appears probable that he will utilise the tribunal to fight the restrictions the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, seeking $16bn: equivalent to half of nation's yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts contend that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Risks

We were assured that these events could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this topic described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies start to realise the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That threat has now materialised. This year, oil and gas and extraction companies have initiated a historic level of cases against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to prevent global warming. Firms have thus far won vast sums by using ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP