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How do you understand our democratic process functions? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Emergence of Offshore Courts

Nowadays, international firms, along with the oligarchs behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of business advocates. These proceedings take place in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, or even businesses headquartered in this country. Access is granted solely for corporations based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

These sums represent not actual losses but funds the arbitrators decide the company might otherwise have made. The administration may have to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of cases are being initiated, as companies observe each other, and investment funds fund legal actions in exchange for a portion of the takings. The outcome? Sovereignty and democratic governance are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the decisions taken by elected bodies is that this clause has been written – without public consent, and often in a climate of extreme secrecy – into international trade agreements.

A Specific Case: The UK Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the licence the Tories had issued. Now, this success faces being overturned by an secret arbitration panel answering to no one but the entities petitioning it.

In August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been allowed to go ahead. The public has no idea how much this sum represents. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it seems likely that he will utilise the tribunal to fight the sanctions the UK imposed on him after the war in Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding a colossal sum: an amount representing half nation's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

The public was told that these scenarios were not possible. In 2014, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this issue accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That threat has come to pass. Recently, oil and gas and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That represents the combined GDP