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Can you understand our democratic process functions? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Advent of Offshore Courts

Today, foreign corporations, or the wealthy individuals that control them, have the power to sue nation states for the regulations they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. They are open only to businesses registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums constitute not real financial harm but compensation the panel members conclude the company might otherwise have made. The administration could be forced to abandon its policy. It is discouraged from enacting future policies along the same lines, worried about being sued.

A System Running Rampant

Historically high figures of cases are being initiated, as companies learn from each other, and hedge funds finance suits in return for a cut of the settlements. The outcome? Sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the choices made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of profound opacity – into bilateral investment treaties.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The justice determined that proposals to dig the first new deep coal mine in the UK for a generation, in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the permission the former government had granted. Today, this victory faces being overturned by an offshore tribunal reporting to only the corporations filing the suit.

During August, a firm whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The government passes a law, the domestic court upholds it, then a international entity disputes it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he will utilise the arbitration process to contest the sanctions the UK imposed on him following the war in Ukraine. He has already filed a claim against another European state on these grounds, seeking $16bn: an amount representing half nation's yearly income. Included in the lawyers acting for him in that case? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

The public was told that such things were not possible. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue described critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were greeted by general mockery.

That warning has come to pass. Recently, energy and resource corporations have initiated a record number of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Corporations have so far won $114bn through ISDS, of which oil majors have obtained the majority. That represents the combined GDP