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What is your reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that was how it used to work. Those days are over.

The Rise of Offshore Courts

Today, overseas companies, and the billionaires who own them, are able to litigate against governments for the policies they pass, at secret arbitration panels composed of business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even enterprises operating from this country. Access is granted only to corporations based overseas.

Should an arbitration panel rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but compensation the tribunal officials conclude the company could potentially have made. The government might be compelled to abandon its policy. It will be deterred from enacting future policies along the same lines, for fear of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings enacted by legislatures is that this clause has been inserted – without public consent, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The justice determined that plans to open the first deep coalmine in the UK for three decades, in northwest England, had been unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the consent the previous administration had granted. Today, this victory faces being overturned by an foreign court answering to only the corporations petitioning it.

During August, a firm whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. We have little idea how much this could amount to. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court validates it, then a overseas corporation contests it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it appears probable that he may employ the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against another European state with similar intent, claiming a colossal sum: half that state's yearly income. Part of the counsel on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that such things were not possible. Previously, a government leader, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and we have never seen a case in the past.” An expert on this issue labelled campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That warning has come to pass. Recently, oil and gas and extraction companies have filed a unprecedented number of cases against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP