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How do you perceive our democratic process functions? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is maintained by the courts. End of story. However, that’s how it once functioned. No longer.

The Rise of Offshore Tribunals

Today, international firms, along with the billionaires that control them, are able to litigate against nation states for the laws they pass, at private courts made up of corporate lawyers. Such disputes take place behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even companies based in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums constitute not real financial harm but money the tribunal officials determine the company could potentially have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being initiated, as firms learn from each other, and private equity fund legal actions for a share of a portion of the takings. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and often in conditions of profound opacity – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Last year, environmental campaigners won a great victory at the senior court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The incoming administration then withdrew the consent the Tories had issued. Now, this legal outcome is under threat by an offshore tribunal reporting to no one but the companies petitioning it.

Last August, a firm whose final controllers are based in the tax haven lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was set up to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel challenging the state? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a foreign company challenges it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Challenge

Concurrently that the tribunal on the coalmine case was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it is highly possible that he may employ the ISDS mechanism to contest the penalties the UK imposed on him following the Russian aggression. He has initiated proceedings against Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half nation's annual revenue. Among the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” An expert on this topic described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “once firms begin to understand the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were met with widespread derision.

That threat has come to pass. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the Whitehaven project – official measures to halt environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP