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Can you perceive our democratic process functions? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that used to be how it operated in the past. No longer.

The Rise of Offshore Tribunals

Today, foreign corporations, and the wealthy individuals that control them, can sue governments for the policies they pass, at private courts staffed by business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, or even enterprises operating from this country. They are open only to corporations based overseas.

When a secret court finds that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

These awards constitute not tangible damages but money the arbitrators conclude the company might otherwise have made. The government could be forced to rescind the measure. It is discouraged from passing future laws in that area, worried about facing litigation.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as corporations observe each other, and private equity bankroll lawsuits in exchange for a cut of the settlements. The consequence? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions made by legislatures is that this stipulation has been inserted – without public consent, and typically amid a climate of total confidentiality – within international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The new government later cancelled the licence the previous administration had issued. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the entities filing the suit.

In August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was established 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 commence operations. Citizens have little idea how much this could amount to. Which individual is representing it against the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case so far, but it appears probable that he will utilise the arbitration process to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has already filed a claim against a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Among the counsel on his side? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Mounting Threats

We were assured that these events wouldn’t happen. Years ago, a senior politician, championing the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this topic described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the influence they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with general mockery.

That threat has come to pass. In the current period, energy and mining firms have filed a record number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – state efforts to prevent global warming. Firms have to date won $114bn through ISDS, of which energy giants have been awarded the majority. That represents the combined GDP