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How do you understand our democratic process functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, foreign corporations, or the billionaires who own them, can sue nation states for the laws they pass, at private courts composed of business advocates. The cases take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. They are open exclusively to entities registered abroad.

When a secret court determines that a law or policy could harm the corporation’s projected profits, it has the power to grant damages of vast sums, potentially billions.

This compensation constitute not actual losses but funds the arbitrators determine the company might otherwise have made. The government may have to abandon its policy. It will be deterred from passing future laws of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds finance suits in exchange for a portion of the awards. The outcome? National sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of profound opacity – into bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the high court. The judge ruled that proposals to excavate the first major coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the consent the Tories had issued. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations petitioning it.

In August, a company whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had received permission to commence operations. We have no clear indication how much this could amount to. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government enacts a policy, the domestic court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case at present, but it is highly possible that he’ll use the tribunal to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, seeking $16bn: half that nation's yearly income. Included in the lawyers on his side? a prominent lawyer, married to the previous PM.

Legal experts argue that the EU’s delay in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these scenarios were not possible. In 2014, a former prime minister, championing the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this matter described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “when companies begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That threat is now a reality. In the current period, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Corporations have to date won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP