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What is your understand our democratic process works? Perhaps something like this. We elect MPs. They vote on bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. However, that used to be how it used to work. No longer.

The Advent of Offshore Tribunals

Today, overseas companies, and the wealthy individuals who own them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. The door is open solely for businesses based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation are based not on actual losses but funds the panel members decide the company would perhaps have made. The government could be forced to abandon its policy. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the choices enacted by legislatures is that this clause has been inserted – without democratic mandate, and typically amid conditions of extreme secrecy – into trade treaties.

A Concrete Case: The UK Coalmine

A year ago, activists won a great victory at the High Court. The presiding officer found that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The new government then withdrew the licence the Tories had granted. Currently, this legal outcome is under threat by an secret arbitration panel accountable to no one but the companies bringing the case.

Last August, a company whose beneficial owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was convened to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this might be. What legal team is acting on its behalf against the state? A sitting MP, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court validates it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming $16bn: an amount representing half state's yearly budget. Among the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that such things were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An adviser on this topic described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were greeted by general mockery.

That prediction has come to pass. This year, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, contesting – as in the case of the Whitehaven project – state efforts to prevent global warming. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP