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What is your understand our democratic process functions? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation are enforced by the courts. Simple as that. However, that was how it operated in the past. Those days are over.

The Rise of Offshore Courts

Today, overseas companies, along with the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of business advocates. The cases are conducted in secret. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even businesses operating from this country. They are open only to corporations operating from foreign soil.

If a tribunal rules that a government measure could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration may have to abandon its policy. It will be discouraged from enacting future policies along the same lines, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as corporations learn from each other, and private equity fund legal actions for a share of a cut of the takings. The consequence? Sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the choices enacted by elected bodies is that this stipulation has been inserted – absent public approval, and frequently under conditions of extreme secrecy – within international trade agreements.

A Real-World Example: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to dig the first new deep coal mine in the UK for three decades, in northwest England, had been unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration subsequently revoked the permission the former government had granted. Now, this success could be compromised by an foreign court accountable to no one but the entities petitioning it.

During August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in the United States was convened to consider the case.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. We have no idea how much this might be. Which individual is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration makes a decision, the national judiciary supports it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it seems likely that he may employ the arbitration process to challenge the restrictions the UK imposed on him after the war in Ukraine. He has started suing Luxembourg for this reason, demanding $16bn: half that nation's annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal upon trade deal and there has not been a issue in the past.” An expert on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Predictions that “once firms grasp the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by scepticism.

That warning has come to pass. This year, oil and gas and extraction companies have initiated a historic level of claims against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured $84bn. That is equivalent to the combined GDP