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Can you understand our democratic process works? It could be along the lines of this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Courts

Today, overseas companies, along with the wealthy individuals who own them, can sue governments for the policies they pass, at offshore tribunals composed of corporate lawyers. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including businesses based in this country. They are open only to entities operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

This compensation are based not on real financial harm but funds the tribunal officials decide the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from enacting future policies of a similar nature, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of disputes are being filed, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a share of the takings. The result? National sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings taken by legislatures is that this clause has been inserted – without public consent, and often in a climate of total confidentiality – inside international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer determined that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration later cancelled the permission the Tories had approved. Now, this victory is under threat by an secret arbitration panel answering to exclusively the corporations bringing the case.

In August, a firm whose beneficial owners are located in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

The company is suing the UK for the profits it might have made if the mine had received permission to proceed. The public has no clear indication how much this might be. Which individual is representing it against the British government? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it appears probable that he’ll use the ISDS mechanism to fight the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has already started suing a small nation for this reason, seeking $16bn: half that state's yearly budget. Part of the legal team acting for him in that case? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

We were assured that these scenarios were not possible. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter labelled campaigners of “exaggeration … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction has come to pass. Recently, fossil fuel and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Corporations have to date won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That equates to the combined GDP