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Can you reckon our democratic process works? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation is upheld by the courts. That's it. However, that used to be how it used to work. No longer.

The Rise of Offshore Tribunals

Today, overseas companies, and the oligarchs behind them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public cannot take a case to them, just as our government, including companies based in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These sums are based not on real financial harm but compensation the tribunal officials conclude the company might otherwise have made. The administration could be forced to abandon its policy. It is deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of legal actions are being brought, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the takings. The consequence? Sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override domestic law and the choices taken by legislatures is that this stipulation has been inserted – absent public approval, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no impact on our carbon budgets. The new government subsequently revoked the licence the former government had issued. Today, this victory could be compromised by an foreign court reporting to no one but the companies bringing the case.

In August, a firm whose ultimate owners are located in the tax haven filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was established to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have no idea how much this could amount to. What legal team is representing it against the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot the MP. The state makes a decision, the national judiciary validates it, then a international entity contests it through an unaccountable private court, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he’ll use the arbitration process to fight the penalties the UK imposed on him after the Russian aggression. He has previously filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that government’s yearly income. Part of the counsel acting for him in that case? a prominent lawyer, married to the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine critically depends on.

Empty Promises and Escalating Costs

Politicians promised that such things could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this topic labelled activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “once firms grasp the power bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction has come to pass. Recently, energy and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Corporations have so far won $114bn through ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP