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How do you reckon our democratic process functions? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Advent of Offshore Courts

In the modern era, international firms, and the oligarchs that control them, have the power to sue nation states for the laws they pass, at private courts composed of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses based in this country. Access is granted solely for corporations based overseas.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but compensation the arbitrators decide the company would perhaps have made. The administration may have to drop the legislation. It becomes deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of cases are being filed, as firms take cues from each other, and private equity finance suits for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the choices enacted by legislatures is that this clause has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Instance: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the High Court. The judge ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The new government then withdrew the consent the former government had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies filing the suit.

During August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Which individual is representing it in opposition to the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot the MP. The administration passes a law, the high court upholds it, then a international entity contests it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK levied against him subsequent to the Russian aggression. He has started suing another European state on these grounds, demanding sixteen billion dollars: equivalent to half of government’s annual revenue. Part of the legal team on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that these events wouldn’t happen. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this matter labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning has now materialised. In the current period, fossil fuel and extraction companies have lodged a record number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to prevent environmental catastrophe. Companies have so far won vast sums through ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP