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Can you reckon our democratic process works? Perhaps something like this. We elect MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that was how it operated in the past. Not anymore.

The Emergence of Offshore Courts

Nowadays, foreign corporations, and the billionaires behind them, have the power to sue governments for the regulations they pass, at private courts composed of corporate lawyers. The cases are held in secret. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. They are open only to entities operating from foreign soil.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it may order damages of vast sums, even billions.

This compensation constitute not actual losses but compensation the arbitrators decide the company could potentially have made. The state may have to rescind the measure. It will be discouraged from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as firms observe each other, and private equity bankroll lawsuits for a share of a portion of the awards. The consequence? National sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by parliaments is that this clause has been written – absent public approval, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine would have had zero effect on our carbon budgets. The new government later cancelled the permission the previous administration had granted. Today, this legal outcome is under threat by an foreign court reporting to no one but the corporations bringing the case.

During August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in the US capital was set up to hear it.

The company is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. We have little idea how much this sum represents. What legal team is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a foreign company challenges it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the court on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it seems likely that he’ll use the tribunal to fight the sanctions the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: half that state's yearly budget. Part of the counsel representing him there? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that such things could not occur. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this topic labelled critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “when companies grasp the authority they now possess, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning has come to pass. Recently, oil and gas and mining firms have lodged a unprecedented number of claims against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP