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Can you understand our democratic process functions? It could be something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Yet, that was how it used to work. No longer.

The Rise of Offshore Courts

Nowadays, foreign corporations, along with the oligarchs behind them, are able to litigate against governments for the policies they pass, at private courts staffed by business advocates. The cases are conducted behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies operating from this country. Access is granted only to businesses based overseas.

Should an arbitration panel determines that a government measure may compromise the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

This compensation constitute not tangible damages but money the panel members decide the company might otherwise have made. The government might be compelled to drop the legislation. It will be deterred from enacting future policies in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of cases are being brought, as corporations observe each other, and investment funds finance suits for a share of a share of the awards. The consequence? National sovereignty and democratic governance are now unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices made by parliaments is that this stipulation has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the licence the former government had granted. Currently, this legal outcome could be compromised by an foreign court answering to exclusively the entities petitioning it.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been allowed to go ahead. The public has no clear indication how much this could amount to. Which individual is serving as its counsel against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the national judiciary supports it, then a international entity challenges it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case so far, but it is highly possible that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him after the war in Ukraine. He has filed a claim against another European state with similar intent, claiming a colossal sum: equivalent to half of nation's yearly income. Part of the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations could be blocking the finance Ukraine urgently requires.

Empty Promises and Growing Costs

Politicians promised that such things were not possible. Previously, a government leader, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this matter accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “once firms grasp the power they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That prediction has come to pass. Recently, fossil fuel and mining firms have lodged a unprecedented number of suits against nations rich and poor, opposing – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP