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What is your reckon our democratic process operates? It could be something like this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, international firms, and the billionaires behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including businesses based in this country. Access is granted only to corporations registered abroad.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

This compensation are based not on actual losses but money the panel members determine the company could potentially have made. The government could be forced to rescind the measure. It becomes hesitant to enacting future policies in that area, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being initiated, as corporations observe each other, and hedge funds finance suits in return for a share of the takings. The outcome? Democratic sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by legislatures is that this stipulation has been written – without democratic mandate, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group won a great victory at the senior court. The judge found that schemes to open the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The Labour government then withdrew the licence the previous administration had approved. Now, this success is under threat by an offshore tribunal reporting to no one but the corporations petitioning it.

Last August, a corporate entity whose final controllers are based in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the United States was set up to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Who is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a international entity challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

On the same day that the court on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case so far, but it seems likely that he may employ the tribunal to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against another European state for this reason, demanding sixteen billion dollars: an amount representing half government’s yearly income. Among the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that these scenarios were not possible. Previously, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this topic labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations grasp the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were met with widespread derision.

That threat has now materialised. In the current period, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to stop global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP