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How do you perceive our democratic process works? It could be similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Well, that used to be how it once functioned. Those days are over.

The Rise of Offshore Courts

Today, foreign corporations, and the oligarchs behind them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings take place in secret. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. They are open only to entities based overseas.

If a tribunal rules that a legislative action could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums constitute not tangible damages but money the tribunal officials determine the company would perhaps have made. The state might be compelled to abandon its policy. It is discouraged from passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being brought, as corporations learn from each other, and private equity bankroll lawsuits in return for a cut of the takings. The outcome? Sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the decisions taken by legislatures is that this stipulation has been incorporated – without public consent, and frequently under a climate of extreme secrecy – inside bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, environmental campaigners secured a significant win at the high court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The Labour government then withdrew the permission the Tories had granted. Currently, this victory is under threat by an secret arbitration panel answering to exclusively the entities petitioning it.

In August, a firm whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the US capital was established to consider the case.

The claimant is litigating against the UK for the money it could have earned if the mine had been permitted to proceed. We have little idea how much this could amount to. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the domestic court validates it, then a international entity disputes it through an secretive private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case to date, but it seems likely that he will utilise the arbitration process to contest the restrictions the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against a small nation for this reason, claiming $16bn: equivalent to half of state's yearly budget. Included in the legal team representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these scenarios were not possible. Previously, a senior politician, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this matter described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations grasp the influence they now possess, they will redirect their efforts from the vulnerable countries to the strong ones” were met with scepticism.

That warning has now materialised. This year, energy and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP