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How do you understand our democratic process functions? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these tribunals grant no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even companies based in this country. Access is granted solely for corporations registered abroad.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it can award financial penalties of hundreds of millions, potentially billions.

These sums represent not tangible damages but money the arbitrators conclude the company would perhaps have made. The state may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and private equity finance suits in return for a share of the awards. The result? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings enacted by elected bodies is that this provision has been inserted – absent public approval, and typically amid conditions of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The justice ruled that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had no impact on our carbon budgets. The Labour government subsequently revoked the consent the former government had issued. Now, this victory is under threat by an foreign court accountable to only the entities filing the suit.

In August, a firm whose beneficial owners are based in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is suing the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no idea how much this could amount to. Who is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government passes a law, the high court supports it, then a international entity challenges it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he may employ the tribunal to challenge the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has started suing another European state on these grounds, demanding a colossal sum: half that state's yearly budget. Part of the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the money Ukraine urgently requires.

False Assurances and Growing Risks

Politicians promised that these events could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An adviser on this matter labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning is now a reality. This year, oil and gas and mining firms have filed a historic level of suits against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to prevent climate breakdown. Corporations have thus far won vast sums via ISDS, of which energy giants have obtained the majority. That represents the combined GDP