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What is your perceive our democratic process works? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that used to be how it operated in the past. No longer.

The Advent of Offshore Tribunals

Today, overseas companies, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held in secret. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open exclusively to corporations registered abroad.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

These awards constitute not real financial harm but compensation the panel members determine the company might otherwise have made. The government may have to drop the legislation. It becomes discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of cases are being brought, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the takings. The result? Sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions made by parliaments is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice found that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the former government had approved. Today, this success could be compromised by an secret arbitration panel answering to exclusively the corporations bringing the case.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Last week a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had received permission to commence operations. The public has little idea how much this sum represents. Which individual is representing it against the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a overseas corporation challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case so far, but it seems likely that he’ll use the tribunal to contest the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, demanding a colossal sum: equivalent to half of government’s yearly income. Included in the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this topic labelled activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Predictions that “as corporations grasp the power they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by scepticism.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a record number of cases against nations rich and poor, contesting – as in the case of the UK mine – state efforts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP