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What is your perceive our democratic process functions? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. Well, that used to be how it used to work. No longer.

The Advent of Offshore Tribunals

In the modern era, international firms, and the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at offshore tribunals composed of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards represent not real financial harm but compensation the arbitrators decide the company would perhaps have made. The government could be forced to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as firms take cues from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions taken by legislatures is that this stipulation has been written – without public consent, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The judge determined that schemes to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no consequence on national carbon targets. The incoming administration then withdrew the consent the previous administration had granted. Today, this legal outcome faces being overturned by an foreign court reporting to no one but the companies bringing the case.

Last August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in the United States was set up to hear it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been allowed to commence operations. We have no idea how much this could amount to. Which individual is acting on its behalf against the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has already filed a claim against another European state for this reason, claiming $16bn: equivalent to half of nation's yearly income. Among the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s delay in utilising seized state funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear such legal actions. Cautionary notes that “when companies grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That warning has come to pass. This year, fossil fuel and extraction companies have lodged a record number of cases against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to prevent global warming. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained the majority. That is equivalent to the combined GDP