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What is your perceive our democratic process works? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills become law. Statutes are enforced by the courts. That's it. However, that was how it used to work. Those days are over.

The Emergence of Offshore Courts

Nowadays, overseas companies, and the billionaires that control them, can sue governments for the regulations they pass, at offshore tribunals staffed by business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. They are open only to businesses based overseas.

When a secret court determines that a legislative action could harm the corporation’s projected profits, it can award compensation of hundreds of millions, running into billions.

These sums constitute not actual losses but compensation the tribunal officials determine the company could potentially have made. The government might be compelled to rescind the measure. It is deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and private equity bankroll lawsuits in return for a portion of the awards. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – within trade treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer found that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration then withdrew the permission the Tories had issued. Currently, this victory faces being overturned by an foreign court accountable to no one but the corporations filing the suit.

During August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the Conservative government, the noted patriot the MP. The state enacts a policy, the high court validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it is highly possible that he will utilise the tribunal to fight the sanctions the UK levied against him after the Russian aggression. He has already initiated proceedings against a small nation for this reason, demanding $16bn: an amount representing half government’s yearly budget. Included in the counsel on his side? Cherie Blair, married to the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An expert on this matter labelled activists of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies begin to understand the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by widespread derision.

That threat is now a reality. This year, fossil fuel and mining firms have initiated a historic level of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – official measures to prevent environmental catastrophe. Companies have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP