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Can you perceive our democratic process functions? Perhaps something like this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. End of story. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at offshore tribunals made up of business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. The door is open exclusively to entities registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation represent not real financial harm but funds the arbitrators decide the company could potentially have made. The administration could be forced to rescind the measure. It is hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of cases are being brought, as companies take cues from each other, and investment funds bankroll lawsuits in return for a portion of the takings. The result? Sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices enacted by elected bodies is that this stipulation has been incorporated – absent public approval, and often in a climate of profound opacity – inside international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the High Court. The judge determined that plans to open the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The incoming administration later cancelled the permission the former government had approved. Today, this success faces being overturned by an offshore tribunal accountable to no one but the corporations petitioning it.

Last August, a company whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute 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 at present, but it is highly possible that he’ll use the ISDS mechanism to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has already filed a claim against a small nation with similar intent, seeking $16bn: equivalent to half of government’s annual revenue. Among the legal team representing him there? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

Politicians promised that such things wouldn’t happen. In 2014, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has not been a problem in the past.” An adviser on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Warnings that “when companies start to realise the power they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That prediction is now a reality. Recently, energy and resource corporations have filed a historic level of suits against nations both wealthy and developing, contesting – similar to the Whitehaven project – official measures to prevent global warming. Companies have to date won $114bn via ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP