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What is your reckon our democratic process works? Maybe something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

In the modern era, foreign corporations, along with the wealthy individuals who own them, can sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted in secret. Differing from national judiciaries, these tribunals provide 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 solely for corporations registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

These awards constitute not actual losses but compensation the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, for fear of being sued.

A Process Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations observe each other, and investment funds fund legal actions for a share of a cut of the awards. The result? National sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the choices made by parliaments is that this stipulation has been written – without public consent, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Concrete Example: The UK Coalmine

Last year, activists won a great victory at the high court. The presiding officer ruled that schemes to dig the first major coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The new government then withdrew the licence the former government had granted. Currently, this success is under threat by an offshore tribunal reporting to exclusively the corporations filing the suit.

During August, a company whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the US capital was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had received permission to commence operations. We have no clear indication how much this might be. Which individual is serving as its counsel in opposition to the state? An elected representative, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court supports it, then a foreign company contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

A Sanctions Challenge

On the same day that the panel on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case at present, but it appears probable that he will utilise the arbitration process to contest the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against another European state for this reason, claiming $16bn: half that nation's yearly budget. Included in the lawyers acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Growing Costs

We were assured that these events could not occur. Years ago, a government leader, championing the largest and riskiest of all these agreements, stated: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this matter labelled activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That prediction has now materialised. This year, fossil fuel and mining firms have lodged a historic level of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – government attempts to stop global warming. Companies have so far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP