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How do you reckon our democratic process operates? It could be along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, and the wealthy individuals who own them, have the power to sue nation states for the policies they pass, at offshore tribunals staffed by business advocates. The cases take place away from public scrutiny. Unlike our courts, these panels provide no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, including enterprises operating from this country. The door is open exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These awards represent not actual losses but money the panel members conclude the company might otherwise have made. The state could be forced to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being initiated, as firms take cues from each other, and investment funds fund legal actions in return for a cut of the awards. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Specific Instance: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer found that proposals to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The Labour government subsequently revoked the licence the former government had issued. Now, this success faces being overturned by an offshore tribunal accountable to only the companies petitioning it.

In August, a firm whose beneficial owners are located in the tax haven lodged a claim versus the UK government. The previous week a arbitration panel in the United States was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been allowed to go ahead. We have little idea how much this could amount to. What legal team is representing it against the state? A member of parliament, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a international entity contests it through an unaccountable private court, and a sitting MP acts on its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he will utilise the tribunal to challenge the penalties the UK levied against him following the war in Ukraine. He has started suing Luxembourg with similar intent, claiming $16bn: equivalent to half of government’s yearly budget. Part of the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in utilising seized oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms start to realise the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That prediction has come to pass. Recently, fossil fuel and resource corporations have lodged a unprecedented number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – government attempts to halt climate breakdown. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP