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Can you reckon our democratic process works? It could be something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, and the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases take place in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, including businesses based in this country. They are open solely for corporations based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on tangible damages but money the panel members decide the company might otherwise have made. The administration might be compelled to rescind the measure. It becomes deterred from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as firms learn from each other, and private equity finance suits in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the rulings enacted by parliaments is that this provision has been written – absent public approval, and often in a climate of extreme secrecy – into trade treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, activists won a great victory at the high court. The presiding officer ruled that plans to excavate the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have no consequence on our carbon budgets. The Labour government subsequently revoked the permission the Tories had issued. Currently, this victory is under threat by an secret arbitration panel accountable to exclusively the companies filing the suit.

In August, a firm whose ultimate owners reside in the tax haven filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was established to consider the case.

The company is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. We have no idea how much this sum represents. Which individual is representing it in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court supports it, then a international entity disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

A Sanctions Challenge

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK enacted against him subsequent to the Russian aggression. He has already started suing a small nation on these grounds, claiming sixteen billion dollars: half that state's yearly budget. Among the counsel representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

False Assurances and Mounting Costs

The public was told that these scenarios were not possible. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this topic described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. In the current period, fossil fuel and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Firms have thus far won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP