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Can you understand our democratic process works? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that was how it used to work. Those days are over.

The Advent of Offshore Courts

Nowadays, international firms, and the oligarchs behind them, have the power to sue nation states for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses based in this country. They are open exclusively to businesses based overseas.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it may order damages of vast sums, running into billions.

These awards represent not actual losses but funds the tribunal officials determine the company would perhaps have made. The state could be forced to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms take cues from each other, and investment funds fund legal actions for a share of a cut of the settlements. The outcome? National sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices enacted by parliaments is that this provision has been inserted – without public consent, and typically amid conditions of profound opacity – within trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The judge ruled that proposals to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration later cancelled the licence the previous administration had granted. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to only the entities filing the suit.

Last August, a company whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had received permission to proceed. Citizens have no idea how much this might be. Who is representing it against the UK administration? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has already filed a claim against a small nation for this reason, claiming a colossal sum: equivalent to half of nation's yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in using frozen Russian assets as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

Politicians promised that these scenarios were not possible. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this matter labelled critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were dismissed with general mockery.

That warning has now materialised. This year, fossil fuel and mining firms have initiated a record number of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP