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How do you perceive our democratic process operates? Maybe similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. However, that’s how it operated in the past. No longer.

The Advent of Offshore Tribunals

Nowadays, overseas companies, and the billionaires who own them, can sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for corporations operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but compensation the tribunal officials determine the company would perhaps have made. The government could be forced to rescind the measure. It will be hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as corporations learn from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? Democratic sovereignty and popular rule are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices made by legislatures is that this provision has been inserted – absent public approval, and often in a climate of extreme secrecy – within trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The judge found that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the consent the Tories had issued. Currently, this success faces being overturned by an foreign court accountable to only the entities bringing the case.

In August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this could amount to. Which individual is representing it challenging the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it seems likely that he will utilise the tribunal to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: half that government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that such things wouldn’t happen. In 2014, a former prime minister, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. This year, oil and gas and resource corporations have lodged a record number of cases against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP