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What is your perceive our democratic process works? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. Well, that’s how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

Today, foreign corporations, along with the billionaires behind them, can sue governments for the laws they pass, at private courts made up of commercial attorneys. These proceedings are held behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, including businesses headquartered in this country. They are open solely for businesses registered abroad.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards represent not real financial harm but money the panel members decide the company could potentially have made. The administration might be compelled to rescind the measure. It will be hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and investment funds finance suits in return for a share of the settlements. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions taken by parliaments is that this provision has been incorporated – without public consent, and typically amid conditions of total confidentiality – inside international trade agreements.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer ruled that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the previous administration had granted. Currently, this legal outcome faces being overturned by an secret arbitration panel reporting to no one but the corporations bringing the case.

In August, a firm whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a international entity challenges it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know scarce of the case at present, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the war in Ukraine. He has already started suing another European state with similar intent, demanding $16bn: half that state's yearly budget. Among the counsel representing him there? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An adviser on this topic described activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies grasp the authority they now possess, they will redirect their efforts from the poorer states to the developed economies” were met with general mockery.

That threat has come to pass. In the current period, fossil fuel and resource corporations have filed a record number of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Firms have to date won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP