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How do you reckon our democratic process operates? It could be along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it operated in the past. Those days are over.

The Advent of Offshore Courts

In the modern era, overseas companies, or the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels grant no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses operating from this country. Access is granted exclusively to corporations based overseas.

When a secret court finds that a legislative action might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, running into billions.

This compensation constitute not real financial harm but compensation the arbitrators decide the company could potentially have made. The state could be forced to rescind the measure. It will be discouraged from introducing similar legislation in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of legal actions are being brought, as companies observe each other, and private equity bankroll lawsuits for a share of a share of the awards. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the choices taken by elected bodies is that this stipulation has been incorporated – without public consent, and typically amid conditions of extreme secrecy – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The incoming administration later cancelled the permission the former government had granted. Now, this legal outcome could be compromised by an foreign court reporting to only the entities petitioning it.

During August, a firm whose beneficial owners reside in the tax haven initiated proceedings against the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The company is suing the UK for the revenue it might have made if the mine had received permission to proceed. Citizens have no idea how much this could amount to. Who is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case to date, but it is highly possible that he will utilise the tribunal to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of government’s yearly income. Part of the legal team representing him there? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Growing Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this matter labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has now materialised. Recently, oil and gas and resource corporations have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP