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Can you reckon our democratic process functions? It could be something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that’s how it once functioned. Those days are over.

The Emergence of Offshore Arbitration Panels

Today, foreign corporations, or the billionaires who own them, have the power to sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals allow no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises headquartered in this country. The door is open only to entities based overseas.

When a secret court determines that a government measure could harm the corporation’s projected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but funds the arbitrators determine the company could potentially have made. The administration may have to abandon its policy. It is hesitant to passing future laws in that area, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of disputes are being filed, as corporations observe each other, and hedge funds finance suits in return for a share of the settlements. The result? Sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings enacted by legislatures is that this provision has been inserted – absent public approval, and often in conditions of profound opacity – into bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, activists won a great victory at the High Court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the Tories had approved. Now, this success is under threat by an foreign court answering to only the entities filing the suit.

During August, a company whose beneficial owners are based in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the profits it might have made if the mine had received permission to commence operations. We have no idea how much this sum represents. What legal team is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: an amount representing half state's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations could be blocking the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

The public was told that these events were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all such treaties, told us: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That warning has now materialised. This year, oil and gas and extraction companies have filed a record number of claims against nations both wealthy and developing, opposing – like the example of the UK mine – official measures to stop climate breakdown. Firms have to date won vast sums by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP