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What is your understand our democratic process operates? It could be something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Emergence of Offshore Courts

Nowadays, international firms, and the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at private courts made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including businesses operating from this country. The door is open exclusively to entities based overseas.

When a secret court determines that a law or policy may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, running into billions.

These sums represent not actual losses but compensation the arbitrators decide the company might otherwise have made. The administration could be forced to drop the legislation. It is discouraged from passing future laws in that area, worried about being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being filed, as companies observe each other, and investment funds bankroll lawsuits in return for a cut of the takings. The result? Sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the rulings enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer determined that schemes to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the Tories had granted. Today, this success is under threat by an secret arbitration panel answering to exclusively the companies filing the suit.

In August, a firm whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been permitted to proceed. We have no idea how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the high court validates it, then a overseas corporation contests it through an secretive private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, secretive influence over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Costs

We were assured that these events could not occur. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, told us: “We’ve signed investment treaty upon trade deal and there has never been a problem in the past.” A consultant on this topic described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with general mockery.

That threat is now a reality. This year, energy and mining firms have filed a historic level of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – government attempts to prevent global warming. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP