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How do you perceive our democratic process functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Yet, that’s how it used to work. Not anymore.

The Rise of Offshore Courts

Nowadays, foreign corporations, and the oligarchs who own them, can sue elected administrations for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies allow no avenue for appeal or legal review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to businesses based overseas.

If a tribunal rules that a legislative action could harm the corporation’s projected profits, it may order financial penalties of vast sums, potentially billions.

These sums represent not tangible damages but funds the tribunal officials conclude the company might otherwise have made. The administration could be forced to rescind the measure. It is deterred from introducing similar legislation in that area, for fear of facing litigation.

A System Growing Exponentially

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds fund legal actions in return for a share of the takings. The outcome? National sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the rulings taken by elected bodies is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the high court. The judge ruled that schemes to open the first major coal mine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the permission the Tories had approved. Currently, this legal outcome is under threat by an foreign court answering to only the corporations filing the suit.

During August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim against the UK government. The previous week a arbitration panel in the US capital was established to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have little idea how much this might be. What legal team is representing it in opposition to the UK administration? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court supports it, then a foreign company contests it through an undemocratic arbitration panel, and a elected official represents its behalf.

A Sanctions Case

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it is highly possible that he will utilise the arbitration process to contest the penalties the UK imposed on him following the war in Ukraine. He has started suing Luxembourg with similar intent, claiming sixteen billion dollars: half that state's yearly income. Among the legal team representing him there? Cherie Blair, married to the former British prime minister.

International law scholars believe that the EU’s delay in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states could be blocking the finance Ukraine urgently requires.

Empty Promises and Mounting Risks

We were assured that such things were not possible. Years ago, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this topic described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations grasp the power they now possess, they will turn their attention from the vulnerable countries to the developed economies” were greeted by widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a historic level of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – government attempts to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP