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What is your reckon our democratic process operates? It could be similar to this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or legal review. You or I cannot take a case to them, just as our government, including enterprises based in this country. They are open solely for corporations based overseas.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These sums constitute not real financial harm but compensation the tribunal officials determine the company would perhaps have made. The state could be forced to rescind the measure. It becomes discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being filed, as firms learn from each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The outcome? Democratic sovereignty and popular rule are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices taken by parliaments is that this clause has been written – without democratic mandate, and often in an atmosphere of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, activists secured a significant win at the senior court. The presiding officer found that plans to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The new government then withdrew the permission the previous administration had approved. Now, this legal outcome faces being overturned by an foreign court answering to no one but the companies filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Who is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a elected official works for its behalf.

A Sanctions Lawsuit

Concurrently that the court on the coalmine case was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it is highly possible that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him after the war in Ukraine. He has previously started suing another European state for this reason, demanding $16bn: half that government’s yearly income. Among the counsel on his side? Cherie Blair, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

Politicians promised that these events could not occur. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement upon trade deal and there has never been a problem in the past.” An expert on this issue labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That threat has now materialised. Recently, oil and gas and mining firms have initiated a historic level of cases against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to prevent climate breakdown. Corporations have thus far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP