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Can you understand our democratic process works? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Well, that was how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

Nowadays, overseas companies, or the billionaires that control them, can sue governments for the laws they pass, at private courts composed of business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises based in this country. They are open only to entities registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These sums are based not on real financial harm but compensation the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It becomes deterred from enacting future policies along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being filed, as firms take cues from each other, and investment funds finance suits for a share of a cut of the settlements. The result? Democratic sovereignty and democratic governance are now too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the choices made by parliaments is that this clause has been inserted – without public consent, and often in a climate of profound opacity – into bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The judge ruled that proposals to excavate the first major coal mine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had issued. Now, this legal outcome faces being overturned by an foreign court answering to exclusively the companies bringing the case.

Last August, a company whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a dispute settlement body in Washington DC was set up to hear it.

The claimant is litigating against the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was convened, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, claiming sixteen billion dollars: an amount representing half government’s yearly income. Among the legal team acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Growing Risks

We were assured that such things wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” An expert on this topic described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with general mockery.

That threat has now materialised. This year, fossil fuel and extraction companies have initiated a unprecedented number of suits against nations rich and poor, challenging – similar to the Whitehaven project – official measures to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP