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What is your reckon our democratic process operates? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Rise of Offshore Courts

Today, foreign corporations, along with the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by business advocates. The cases are conducted in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, including businesses operating from this country. They are open solely for businesses operating from foreign soil.

If a tribunal determines that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These sums constitute not real financial harm but funds the panel members determine the company might otherwise have made. The administration may have to abandon its policy. It is deterred from passing future laws in that area, worried about being sued.

A System Running Rampant

Historically high figures of disputes are being filed, as firms learn from each other, and private equity fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the decisions made by parliaments is that this provision has been written – absent public approval, and often in an atmosphere of profound opacity – into international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The Labour government subsequently revoked the permission the former government had issued. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the entities bringing the case.

In August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a arbitration panel in the United States was established to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no idea how much this might be. What legal team is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The government passes a law, the high court validates it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team on his side? Cherie Blair, wife of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Previously, a former prime minister, championing the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “once firms start to realise the authority they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and extraction companies have lodged a historic level of suits against nations across the economic spectrum, opposing – similar to the Whitehaven project – official measures to stop environmental catastrophe. Firms have thus far won $114bn by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP