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How do you perceive our democratic process operates? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Advent of Offshore Courts

Nowadays, foreign corporations, or the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, including businesses based in this country. The door is open only to entities registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These sums are based not on actual losses but compensation the arbitrators conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as firms observe each other, and hedge funds bankroll lawsuits in exchange for a portion of the takings. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the decisions taken by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under conditions of total confidentiality – within international trade agreements.

A Specific Instance: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The justice ruled that plans to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The Labour government then withdrew the licence the Tories had issued. Today, this legal outcome could be compromised by an offshore tribunal accountable to exclusively the corporations filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in the United States was established to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Which individual is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot the MP. The government makes a decision, the national judiciary supports it, then a international entity contests it through an secretive private court, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the court on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case so far, but it seems likely that he’ll use the arbitration process to fight the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, seeking $16bn: half that state's yearly income. Part of the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these scenarios could not occur. Years ago, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has never been a case in the past.” An expert on this topic described campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and extraction companies have initiated a record number of claims against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Companies have to date won $114bn through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP