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How do you understand our democratic process functions? Maybe something like this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

Nowadays, international firms, and the billionaires behind them, have the power to sue elected administrations for the policies they pass, at private courts composed of corporate lawyers. The cases are held in secret. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open solely for entities registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant damages of vast sums, potentially billions.

These awards represent not real financial harm but funds the tribunal officials conclude the company could potentially have made. The government might be compelled to drop the legislation. It becomes hesitant to enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and investment funds fund legal actions in exchange for a portion of the takings. The consequence? National sovereignty and democratic governance are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions taken by legislatures is that this clause has been written – absent public approval, and often in conditions of profound opacity – into trade treaties.

A Concrete Case: The UK Coal Mine

A year ago, activists secured a significant win at the high court. The presiding officer determined that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the licence the former government had approved. Currently, this victory is under threat by an foreign court reporting to only the entities petitioning it.

Last August, a company whose beneficial owners are based in the tax haven lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to adjudicate on it.

The claimant is suing the UK for the money it could have earned if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is serving as its counsel challenging the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the high court validates it, then a foreign company challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he will utilise the tribunal to contest the restrictions the UK enacted against him following the invasion of Ukraine. He has started suing another European state with similar intent, seeking a colossal sum: half that government’s annual revenue. Part of the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that such things were not possible. Previously, a senior politician, promoting the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms begin to understand the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have thus far won $114bn through ISDS, of which oil majors have secured $84bn. That represents the combined GDP