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Can you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that was how it once functioned. Not anymore.

The Rise of Offshore Courts

Today, international firms, along with the oligarchs that control them, can sue nation states for the regulations they pass, at offshore tribunals staffed by corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open exclusively to entities operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but compensation the tribunal officials determine the company would perhaps have made. The administration may have to drop the legislation. It is hesitant to introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of cases are being filed, as corporations observe each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? Sovereignty and democracy are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings taken by parliaments is that this stipulation has been written – absent public approval, and often in a climate of profound opacity – within trade treaties.

A Concrete Example: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the high court. The presiding officer found that plans to excavate the first major coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the consent the former government had granted. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had been allowed to proceed. Citizens have no idea how much this might be. Which individual is serving as its counsel in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case so far, but it seems likely that he may employ the ISDS mechanism to fight the penalties the UK enacted against him after the invasion of Ukraine. He has previously started suing Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, spouse of the previous PM.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that such things could not occur. Previously, a senior politician, promoting the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this topic described campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “once firms start to realise the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. In the current period, energy and mining firms have lodged a record number of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – government attempts to stop environmental catastrophe. Firms have thus far won $114bn via ISDS, of which oil majors have been awarded the majority. That represents the combined GDP