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How do you reckon our democratic process operates? It could be something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Nowadays, overseas companies, along with the billionaires behind them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel determines that a government measure could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These sums represent not real financial harm but compensation the tribunal officials determine the company could potentially have made. The administration could be forced to rescind the measure. It will be discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being brought, as firms learn from each other, and investment funds bankroll lawsuits for a share of a share of the awards. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions made by parliaments is that this provision has been incorporated – without democratic mandate, and often in a climate of profound opacity – within trade treaties.

A Specific Case: The Cumbrian Coal Mine

A year ago, activists won a great victory at the high court. The presiding officer determined that plans to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the consent the former government had issued. Now, this victory is under threat by an secret arbitration panel answering to only the companies petitioning it.

In August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit versus the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this might be. Which individual is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state passes a law, the domestic court upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK enacted against him following the invasion of Ukraine. He has already filed a claim against Luxembourg with similar intent, seeking sixteen billion dollars: half that nation's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that such things could not occur. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a issue in the past.” An expert on this issue described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “once firms start to realise the influence they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with scepticism.

That threat has now materialised. Recently, fossil fuel and resource corporations have lodged a record number of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – government attempts to halt global warming. Firms have so far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP