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Can you reckon our democratic process works? It could be along the lines of this. We elect MPs. They vote on bills. If a majority is secured, the bills become law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, can sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are held in secret. In contrast to domestic courts, these bodies provide no right of appeal or legal review. The general public cannot take a case to them, and neither can our government, including businesses headquartered in this country. The door is open only to businesses based overseas.

When a secret court determines that a government measure could harm the corporation’s projected profits, it can award compensation of vast sums, potentially billions.

This compensation constitute not actual losses but funds the tribunal officials conclude the company could potentially have made. The state could be forced to abandon its policy. It will be discouraged from passing future laws along the same lines, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of disputes are being filed, as firms observe each other, and hedge funds finance suits in return for a share of the takings. The result? Democratic sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the decisions made by elected bodies is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that proposals to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The incoming administration then withdrew the consent the previous administration had granted. Currently, this victory faces being overturned by an foreign court answering to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the United States was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. What legal team is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him following the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Among the legal team on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the money Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that such things wouldn’t happen. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” A consultant on this topic accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “as corporations start to realise the influence they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the UK mine – official measures to stop global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP