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How do you understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. End of story. However, that used to be how it once functioned. No longer.

The Rise of Offshore Courts

Today, foreign corporations, or the oligarchs that control them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals composed of business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. You or I cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted only to corporations registered abroad.

If a tribunal rules that a law or policy could harm the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, even billions.

These awards constitute not tangible damages but funds the panel members conclude the company would perhaps have made. The administration might be compelled to abandon its policy. It is discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as firms observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? Sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by parliaments is that this provision has been written – without public consent, and frequently under an atmosphere of profound opacity – inside bilateral investment treaties.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge found that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The Labour government later cancelled the licence the former government had issued. Currently, this legal outcome faces being overturned by an secret arbitration panel accountable to no one but the corporations petitioning it.

Last August, a firm whose beneficial owners are located in the tax haven lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK levied against him after the invasion of Ukraine. He has previously started suing a small nation for this reason, seeking $16bn: equivalent to half of state's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that such things were not possible. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this topic labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “once firms start to realise the power they’ve been granted, they will shift their focus from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have filed a record number of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP