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Can you perceive our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is upheld by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Offshore Tribunals

Today, foreign corporations, or the oligarchs who own them, are able to litigate against governments for the laws they pass, at secret arbitration panels composed of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. They are open exclusively to corporations operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

These awards constitute not real financial harm but compensation the arbitrators decide the company could potentially have made. The government could be forced to drop the legislation. It is deterred from passing future laws in that area, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of legal actions are being initiated, as firms take cues from each other, and investment funds finance suits in exchange for a cut of the awards. The result? Sovereignty and democracy are turning into unaffordable.

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

A Concrete Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the high court. The justice found that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The Labour government later cancelled the permission the previous administration had issued. Today, this success faces being overturned by an foreign court answering to only the corporations petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in the United States was set up to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had received permission to go ahead. Citizens have little idea how much this could amount to. Which individual is acting on its behalf against the British government? An elected representative, and former attorney-general in the previous government, the noted patriot the MP. The government enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it appears probable that he’ll use the arbitration process to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against another European state on these grounds, claiming a colossal sum: half that nation's annual revenue. Included in the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in utilising seized state funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

Politicians promised that such things were not possible. In 2014, a government leader, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this topic accused critics of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states needed to fear such legal actions. Warnings that “once firms start to realise the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with scepticism.

That threat has now materialised. In the current period, energy and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, opposing – similar to the Whitehaven project – official measures to stop climate breakdown. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP