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How do you perceive our democratic process operates? It could be similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. Not anymore.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, along with the billionaires that control them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. Such disputes take place in secret. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, including enterprises operating from this country. They are open only to businesses registered abroad.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These sums are based not on real financial harm but funds the panel members conclude the company would perhaps have made. The administration may have to rescind the measure. It will be discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity fund legal actions for a share of a share of the awards. The consequence? National sovereignty and democracy are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – inside trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists won a great victory at the senior court. The presiding officer found that proposals to open the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine would have no impact on national carbon targets. The new government then withdrew the consent the previous administration had granted. Currently, this victory is under threat by an foreign court answering to exclusively the corporations filing the suit.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. The previous week a tribunal in the United States was convened to adjudicate on it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. What legal team is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Challenge

Concurrently that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case at present, but it seems likely that he may employ the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, claiming sixteen billion dollars: equivalent to half of state's annual revenue. Included in the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these events were not possible. Previously, a government leader, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction is now a reality. This year, fossil fuel and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to stop global warming. Firms have thus far won vast sums by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP