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How do you reckon our democratic process functions? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, along with the oligarchs who own them, can sue nation states for the regulations they pass, at private courts staffed by commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these bodies provide no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including businesses headquartered in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not actual losses but money the panel members conclude the company could potentially have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being brought, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the settlements. The result? Democratic sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the choices made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under a climate of total confidentiality – into international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Last year, activists won a great victory at the High Court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had no consequence on climate commitments. The Labour government later cancelled the licence the former government had granted. Today, this success is under threat by an secret arbitration panel accountable to exclusively the corporations filing the suit.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

The claimant is suing the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this sum represents. Which individual is representing it in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the court on the mining lawsuit was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case so far, but it appears probable that he’ll use the arbitration process to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has started suing Luxembourg with similar intent, demanding sixteen billion dollars: half that nation's yearly income. Included in the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and we have never seen a case in the past.” An adviser on this topic described campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were greeted by widespread derision.

That threat has now materialised. In the current period, oil and gas and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have thus far won $114bn through ISDS, of which energy giants have obtained the majority. That represents the combined GDP