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What is your understand our democratic process works? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Courts

Today, overseas companies, along with the wealthy individuals that control them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are held behind closed doors. Unlike our courts, these bodies allow no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, or even companies headquartered in this country. They are open exclusively to entities based overseas.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but funds the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It will be discouraged from enacting future policies of a similar nature, worried about being sued.

A System Running Rampant

Unprecedented levels of cases are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in exchange for a portion of the awards. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the choices made by elected bodies is that this clause has been incorporated – without public consent, and often in conditions of profound opacity – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, a conservation group won a great victory at the senior court. The presiding officer ruled that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on national carbon targets. The new government then withdrew the permission the former government had issued. Currently, this success could be compromised by an secret arbitration panel answering to only the entities bringing the case.

Last August, a company whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is suing the UK for the profits it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is serving as its counsel challenging the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that such things wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this topic labelled campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations grasp the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That warning has now materialised. Recently, energy and extraction companies have initiated a record number of suits against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to halt global warming. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP