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Can you reckon our democratic process works? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, and the billionaires that control them, have the power to sue governments for the laws they pass, at offshore tribunals made up of business advocates. These proceedings take place behind closed doors. In contrast to domestic courts, these bodies grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including businesses operating from this country. They are open only to entities operating from foreign soil.

When a secret court finds that a government measure may compromise the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

These awards represent not real financial harm but compensation the panel members decide the company might otherwise have made. The state might be compelled to drop the legislation. It is discouraged from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The consequence? Sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings made by legislatures is that this clause has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Specific Example: The UK Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the permission the Tories had granted. Today, this success is under threat by an secret arbitration panel reporting to no one but the corporations bringing the case.

Last August, a firm whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the money it might have made if the mine had been allowed to proceed. We have no clear indication how much this sum represents. Who is serving as its counsel challenging the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a foreign company challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it appears probable that he’ll use the tribunal to fight the penalties the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against Luxembourg on these grounds, demanding a colossal sum: half that state's yearly income. Included in the lawyers on his side? a prominent lawyer, married to the previous PM.

Legal experts argue that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that these events were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter labelled critics of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were met with scepticism.

That prediction has come to pass. In the current period, energy and extraction companies have lodged a record number of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP