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Can you understand our democratic process functions? It could be along the lines of this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Rise of Offshore Tribunals

Nowadays, overseas companies, along with the wealthy individuals that control them, can sue nation states for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals provide no avenue for appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. The door is open solely for businesses based overseas.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

This compensation constitute not actual losses but funds the arbitrators determine the company could potentially have made. The state could be forced to drop the legislation. It will be discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being filed, as companies take cues from each other, and private equity bankroll lawsuits in return for a cut of the takings. The consequence? Democratic sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings taken by parliaments is that this clause has been inserted – without public consent, and often in conditions of total confidentiality – within trade treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge determined that plans to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have zero effect on climate commitments. The incoming administration later cancelled the permission the previous administration had granted. Now, this legal outcome could be compromised by an secret arbitration panel answering to no one but the corporations petitioning it.

Last August, a company whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in the US capital was established to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The state passes a law, the national judiciary supports it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the panel on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously started suing Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly budget. Among the lawyers on his side? Cherie Blair, wife of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these scenarios could not occur. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An expert on this matter described campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That warning is now a reality. This year, fossil fuel and resource corporations have lodged a unprecedented number of suits against nations both wealthy and developing, challenging – as in the case of the Cumbrian coalmine – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP