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What is your understand our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes is upheld by the courts. End of story. However, that’s how it used to work. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted in secret. Unlike our courts, these tribunals grant no right of appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses based in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

This compensation are based not on tangible damages but compensation the panel members decide the company would perhaps have made. The administration could be forced to drop the legislation. It becomes discouraged from passing future laws of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of legal actions are being filed, as companies take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The outcome? Democratic sovereignty and democracy are now unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and frequently under conditions of profound opacity – within trade treaties.

A Specific Example: The UK Coalmine

Last year, a conservation group secured a significant win at the high court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on climate commitments. The incoming administration later cancelled the permission the previous administration had granted. Today, this victory faces being overturned by an foreign court answering to no one but the companies bringing the case.

In August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the United States was convened to hear it.

The company is suing the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. What legal team is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a international entity disputes it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him following the Russian aggression. He has already filed a claim against another European state on these grounds, demanding $16bn: equivalent to half of government’s yearly income. Included in the legal team on his side? Cherie Blair, wife of the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these scenarios could not occur. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” A consultant on this topic labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the power they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. Recently, energy and extraction companies have lodged a record number of cases against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP