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What is your reckon our democratic process operates? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, or the wealthy individuals that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. You or I are unable to file a case to them, nor can our government, including enterprises based in this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These awards represent not actual losses but money the panel members decide the company would perhaps have made. The administration might be compelled to rescind the measure. It will be discouraged from introducing similar legislation in that area, for fear of facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as corporations take cues from each other, and investment funds finance suits for a share of a cut of the settlements. The result? Sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the decisions made by elected bodies is that this clause has been written – without public consent, and typically amid conditions of profound opacity – inside trade treaties.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The judge found that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the permission the former government had granted. Currently, this success faces being overturned by an offshore tribunal accountable to exclusively the companies filing the suit.

Last August, a company whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Who is representing it in opposition to the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an secretive private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it is highly possible that he’ll use the tribunal to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, demanding a colossal sum: half that government’s annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these events were not possible. Previously, a senior politician, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations grasp the authority they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That warning has now materialised. In the current period, energy and resource corporations have initiated a historic level of claims against nations both wealthy and developing, opposing – similar to the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which oil majors have secured the majority. That represents the combined GDP