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What is your understand our democratic process works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that was how it once functioned. Not anymore.

The Rise of Offshore Tribunals

Nowadays, foreign corporations, along with the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open only to corporations registered abroad.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These awards constitute not real financial harm but compensation the tribunal officials decide the company might otherwise have made. The government may have 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 legal actions are being initiated, as companies take cues from each other, and private equity finance suits in return for a cut of the settlements. The result? Sovereignty and popular rule are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the rulings taken by elected bodies is that this stipulation has been inserted – absent public approval, and typically amid conditions of total confidentiality – inside international trade agreements.

A Specific Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The justice found that proposals to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the questionable argument that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the permission the former government had approved. Currently, this legal outcome is under threat by an offshore tribunal accountable to exclusively the entities bringing the case.

During August, a firm whose beneficial owners are based in the offshore financial centre filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this might be. What legal team is serving as its counsel against the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The administration passes a law, the high court supports it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK levied against him after the war in Ukraine. He has previously filed a claim against another European state for this reason, seeking $16bn: an amount representing half nation's yearly budget. Part of the lawyers representing him there? Cherie Blair, married to the previous PM.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this issue labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. In the current period, energy and mining firms have lodged a historic level of claims against nations across the economic spectrum, challenging – like the example of the UK mine – official measures to stop environmental catastrophe. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That represents the combined GDP