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Can you perceive our democratic process operates? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. The law are enforced by the courts. That's it. Well, that used to be how it used to work. Those days are over.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. The cases take place in secret. Unlike our courts, these panels grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. They are open exclusively to corporations based overseas.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is hesitant to passing future laws along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being initiated, as companies learn from each other, and private equity bankroll lawsuits for a share of a portion of the awards. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings enacted by elected bodies is that this stipulation has been written – absent public approval, and typically amid conditions of profound opacity – inside international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer determined that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The Labour government subsequently revoked the permission the Tories had issued. Currently, this success faces being overturned by an foreign court answering to exclusively the companies petitioning it.

In August, a corporate entity whose final controllers are located in the tax haven initiated proceedings versus the UK government. Last week a arbitration panel in Washington DC was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no idea how much this might be. Who is acting on its behalf against the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The government enacts a policy, the high court supports it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it seems likely that he may employ the arbitration process to challenge the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

Politicians promised that such things were not possible. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, told us: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An expert on this issue described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies grasp the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. This year, fossil fuel and resource corporations have filed a unprecedented number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Corporations have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP