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How do you understand our democratic process works? Perhaps along the lines of this. We elect MPs. They legislate on bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. Well, that was how it operated in the past. Those days are over.

The Advent of Offshore Arbitration Panels

In the modern era, foreign corporations, along with the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at private courts staffed by corporate lawyers. The cases are held in secret. In contrast to domestic courts, these panels grant no right of appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to corporations based overseas.

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

This compensation are based not on real financial harm but money the panel members determine the company could potentially have made. The state may have to abandon its policy. It becomes deterred from enacting future policies of a similar nature, worried about being sued.

A System Growing Exponentially

Record numbers of legal actions are being initiated, as companies learn from each other, and private equity fund legal actions in return for a portion of the awards. The consequence? National sovereignty and democratic governance are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the decisions made by elected bodies is that this provision has been inserted – without public consent, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice found that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The Labour government then withdrew the consent the former government had issued. Now, this victory could be compromised by an offshore tribunal reporting to exclusively the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are based in the offshore financial centre lodged a claim against the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

The claimant 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. What legal team is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The government passes a law, the high court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know little of the case so far, but it is highly possible that he will utilise the arbitration process to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's yearly budget. Included in the lawyers representing him there? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to halt climate breakdown. Corporations have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP