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What is your understand our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that was how it used to work. No longer.

The Advent of Offshore Tribunals

In the modern era, foreign corporations, along with the billionaires who own them, are able to litigate against nation states for the regulations they pass, at secret arbitration panels made up of commercial attorneys. Such disputes are held behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses operating from this country. They are open exclusively to businesses registered abroad.

If a tribunal rules that a legislative action could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards are based not on tangible damages but funds the tribunal officials conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It will be hesitant to passing future laws in that area, due to the risk of being sued.

A Process Running Rampant

Unprecedented levels of cases are being filed, as companies learn from each other, and private equity bankroll lawsuits in exchange for a cut of the awards. The consequence? National sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the decisions enacted by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Last year, activists secured a significant win at the high court. The judge determined that schemes to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have no consequence on climate commitments. The new government subsequently revoked the consent the former government had approved. Currently, this legal outcome could be compromised by an foreign court reporting to exclusively the companies petitioning it.

In August, a firm whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. What legal team is serving as its counsel against the state? A sitting MP, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official acts on its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he may employ the arbitration process to fight the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously filed a claim against another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s annual revenue. Among the legal team representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s delay 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 bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that these events were not possible. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations grasp the influence bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat has now materialised. Recently, fossil fuel and mining firms have filed a record number of claims against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt climate breakdown. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP