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Can you perceive our democratic process functions? It could be something like this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is upheld by the courts. End of story. Yet, that was how it used to work. No longer.

The Rise of Offshore Tribunals

Today, foreign corporations, and the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies operating from this country. The door is open exclusively to entities operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

These awards constitute not tangible damages but compensation the tribunal officials decide the company could potentially have made. The administration might be compelled to drop the legislation. It will be discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The result? National sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of profound opacity – within international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Last year, activists secured a significant win at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the previous administration had approved. Today, this victory is under threat by an offshore tribunal answering to no one but the companies petitioning it.

In August, a firm whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was convened to hear it.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. Citizens have no idea how much this sum represents. Which individual is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it appears probable that he will utilise the tribunal to fight the restrictions the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking $16bn: equivalent to half of state's annual revenue. Part of the legal team representing him there? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Mounting Costs

We were assured that these scenarios were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” An expert on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That warning is now a reality. Recently, energy and extraction companies have initiated a record number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to halt global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP