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What is your understand our democratic process functions? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. Legislation is upheld by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the oligarchs that control them, can sue nation states for the regulations they pass, at private courts composed of business advocates. These proceedings take place behind closed doors. Unlike our courts, these bodies 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 companies headquartered in this country. They are open exclusively to corporations registered abroad.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration may have to drop the legislation. It will be deterred from enacting future policies in that area, due to the risk of being sued.

A System Spiralling Out of Control

Unprecedented levels of cases are being brought, as corporations learn from each other, and investment funds fund legal actions in exchange for a share of the settlements. The outcome? Democratic sovereignty and democracy are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions enacted by legislatures is that this clause has been written – absent public approval, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the high court. The justice found that proposals to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The Labour government subsequently revoked the licence the former government had approved. Now, this success is under threat by an secret arbitration panel reporting to no one but the entities petitioning it.

In August, a firm whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was established to hear it.

This firm is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. The public has little idea how much this could amount to. Who is representing it challenging the UK administration? A member of parliament, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he will utilise the arbitration process to contest the penalties the UK imposed on him following the Russian aggression. He has previously filed a claim against another European state with similar intent, seeking sixteen billion dollars: half that government’s yearly income. Included in the counsel on his side? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in utilising seized Russian assets as security for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the money Ukraine critically depends on.

Empty Promises and Mounting Risks

The public was told that these scenarios were not possible. Years ago, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An adviser on this issue accused campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That threat has come to pass. This year, oil and gas and extraction companies have initiated a record number of claims against nations across the economic spectrum, opposing – like the example of the UK mine – government attempts to prevent global warming. Companies have to date won $114bn by using ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP