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Can you perceive our democratic process operates? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

Nowadays, foreign corporations, or the oligarchs behind them, have the power to sue governments for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to corporations operating from foreign soil.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums constitute not real financial harm but money the arbitrators decide the company would perhaps have made. The administration may have to abandon its policy. It becomes hesitant to introducing similar legislation in that area, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as firms take cues from each other, and private equity finance suits for a share of a cut of the awards. The consequence? Sovereignty and democratic governance are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the rulings enacted by parliaments is that this clause has been written – without public consent, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer found that plans to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The incoming administration then withdrew the consent the previous administration had approved. Currently, this success faces being overturned by an secret arbitration panel accountable to no one but the corporations bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. We have little idea how much this might be. What legal team is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration makes a decision, the domestic court validates it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the war in Ukraine. He has already filed a claim against a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of state's yearly budget. Part of the counsel on his side? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that such things were not possible. Years ago, a senior politician, promoting the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” A consultant on this matter accused critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear these lawsuits. Warnings that “once firms start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. In the current period, energy and mining firms have lodged a historic level of claims against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Companies have thus far won vast sums by using ISDS, of which energy giants have obtained the majority. That represents the combined GDP