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Can you perceive our democratic process works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Rise of Offshore Tribunals

Nowadays, overseas companies, and the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including enterprises headquartered in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, even billions.

This compensation represent not tangible damages but money the tribunal officials decide the company could potentially have made. The government could be forced to rescind the measure. It becomes deterred from passing future laws of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as companies observe each other, and private equity finance suits in return for a cut of the settlements. The result? National sovereignty and democratic governance are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions taken by legislatures is that this provision has been incorporated – without public consent, and typically amid conditions of extreme secrecy – into trade treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice found that schemes to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government later cancelled the permission the former government had approved. Now, this legal outcome is under threat by an foreign court reporting to only the entities petitioning it.

During August, a company whose beneficial owners are located in the Cayman Islands lodged a claim against the UK government. Recently a dispute settlement body in the US capital was established to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has little idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the penalties the UK imposed on him after the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming $16bn: an amount representing half government’s yearly income. Included in the counsel representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations may be obstructing the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were met with general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have lodged a historic level of claims against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to stop global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP