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What is your reckon our democratic process functions? It could be along the lines of this. We elect MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Yet, that’s how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Today, foreign corporations, or the oligarchs who own them, are able to litigate against elected administrations for the regulations they pass, at offshore tribunals composed of business advocates. These proceedings take place in secret. Differing from national judiciaries, these panels grant no avenue for appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it may order damages of vast sums, even billions.

These sums are based not on actual losses but money the tribunal officials decide the company might otherwise have made. The state might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies observe each other, and investment funds fund legal actions in return for a portion of the takings. The outcome? Democratic sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge found that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the permission the former government had approved. Now, this success could be compromised by an offshore tribunal reporting to only the corporations filing the suit.

In August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The company is suing the UK for the profits it could have earned if the mine had been allowed to proceed. We have no idea how much this might be. Who is representing it in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a international entity disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it seems likely that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has initiated proceedings against a small nation on these grounds, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the counsel representing him there? a prominent lawyer, married to the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that such things were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this issue labelled critics of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear such legal actions. Predictions that “once firms start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and extraction companies have filed a record number of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won $114bn via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP