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What is your perceive our democratic process functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that was how it used to work. Not anymore.

The Rise of Offshore Courts

Today, foreign corporations, and the billionaires that control them, are able to litigate against governments for the regulations they pass, at private courts staffed by business advocates. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises based in this country. They are open solely for businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it may order damages of vast sums, potentially billions.

These sums represent not actual losses but money the panel members conclude the company could potentially have made. The state might be compelled to rescind the measure. It will be hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions enacted by legislatures is that this stipulation has been incorporated – without public consent, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Case: The UK Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The judge found that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the consent the former government had approved. Today, this victory faces being overturned by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a firm whose ultimate owners are located in the tax haven filed a lawsuit versus the UK government. The previous week a tribunal in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to go ahead. We have no idea how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and ex-law officer in the outgoing administration, that great patriot the MP. The state passes a law, the high court supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

On the same day that the tribunal on the coal mine dispute was established, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK enacted against him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, claiming $16bn: half that government’s annual revenue. Among the lawyers representing him there? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Costs

Politicians promised that these scenarios wouldn’t happen. In 2014, a senior politician, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An adviser on this matter described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “once firms grasp the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That warning has now materialised. In the current period, energy and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP