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What is your reckon our democratic process functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Emergence of Offshore Courts

In the modern era, international firms, or the billionaires who own them, are able to litigate against elected administrations for the policies they pass, at private courts staffed by business advocates. Such disputes are conducted behind closed doors. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums are based not on actual losses but funds the tribunal officials determine the company might otherwise have made. The administration may have to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices made by legislatures is that this clause has been written – absent public approval, and frequently under a climate of total confidentiality – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to open the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the permission the Tories had approved. Now, this success could be compromised by an offshore tribunal accountable to no one but the companies filing the suit.

During August, a firm whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was set up to hear it.

The claimant is suing the UK for the revenue it could have earned if the mine had received permission to go ahead. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the state? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it seems likely that he may employ the arbitration process to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, seeking sixteen billion dollars: half that nation's yearly budget. Among the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that such things could not occur. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this topic labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states needed to fear such legal actions. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were met with general mockery.

That prediction has come to pass. In the current period, energy and resource corporations have initiated a historic level of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP