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What is your reckon our democratic process operates? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Rise of Offshore Courts

Nowadays, international firms, and the wealthy individuals behind them, can sue nation states for the laws they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. The general public cannot take a case to them, nor can our government, including businesses headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These awards constitute not tangible damages but compensation the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and private equity fund legal actions in return for a share of the settlements. The consequence? National sovereignty and democratic governance are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings made by legislatures is that this clause has been written – absent public approval, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge determined that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the permission the former government had approved. Currently, this success faces being overturned by an offshore tribunal accountable to only the corporations petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the money it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. Which individual is representing it against the state? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the high court supports it, then a international entity contests it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Challenge

Concurrently that the court on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that such things were not possible. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An expert on this matter accused campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with scepticism.

That threat has now materialised. Recently, fossil fuel and mining firms have initiated a record number of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have to date won vast sums through ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP