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Can you perceive our democratic process functions? It could be something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. However, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings take place in secret. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even businesses operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel finds that a law or policy may compromise the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

These sums are based not on tangible damages but compensation the panel members conclude the company could potentially have made. The government might be compelled to rescind the measure. It will be deterred from introducing similar legislation along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of disputes are being brought, as firms learn from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The consequence? Sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override a country's own laws and the choices taken by legislatures is that this provision has been incorporated – without public consent, and typically amid conditions of profound opacity – into international trade agreements.

A Specific Instance: The UK Coalmine

Last year, activists achieved a major legal triumph at the senior court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The new government later cancelled the licence the previous administration had approved. Now, this legal outcome is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. The public has no idea how much this might be. What legal team is serving as its counsel against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a overseas corporation contests it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it seems likely that he may employ the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has already started suing Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Growing Threats

Politicians promised that such things could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has never been a issue in the past.” An adviser on this matter labelled campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat has come to pass. This year, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have so far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP