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What is your understand our democratic process functions? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, foreign corporations, along with the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings take place in secret. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. The door is open only to businesses registered abroad.

When a secret court determines that a legislative action might diminish the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration could be forced to drop the legislation. It will be hesitant to passing future laws along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and hedge funds fund legal actions for a share of a portion of the takings. The consequence? Democratic sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings made by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Real-World Instance: The UK Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government then withdrew the permission the former government had approved. Now, this victory could be compromised by an secret arbitration panel reporting to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in the US capital was established to hear it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The administration enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an undemocratic private court, and a elected official acts on its behalf.

An Oligarch's Case

Simultaneously that the panel on the coal mine dispute was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know little of the case to date, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him following the invasion of Ukraine. He has initiated proceedings against another European state with similar intent, demanding $16bn: half that nation's yearly budget. Part of the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that such things wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations start to realise the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were met with widespread derision.

That threat is now a reality. In the current period, oil and gas and mining firms have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That represents the combined GDP