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How do you reckon our democratic process works? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, international firms, along with the billionaires that control them, are able to litigate against governments for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these panels grant no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, including businesses based in this country. Access is granted only to businesses based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but money the tribunal officials decide the company would perhaps have made. The government could be forced to abandon its policy. It will be discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as companies observe each other, and investment funds finance suits for a share of a cut of the takings. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the decisions made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Concrete Example: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge found that schemes to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the consent the previous administration had granted. Today, this victory is under threat by an offshore tribunal answering to only the companies bringing the case.

Last August, a company whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. We have no idea how much this could amount to. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The administration makes a decision, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic private court, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he will utilise the tribunal to contest the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation for this reason, demanding $16bn: equivalent to half of state's yearly income. Included in the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Risks

The public was told that these events could not occur. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this issue labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “once firms grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning is now a reality. This year, fossil fuel and extraction companies have filed a historic level of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP