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Can you understand our democratic process functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills become law. The law is maintained by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Rise of Offshore Courts

Nowadays, international firms, and the billionaires behind them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases are conducted in secret. Unlike our courts, these bodies provide no right of appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open solely for businesses based overseas.

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

These awards are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The state may have to rescind the measure. It will be hesitant to introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and hedge funds fund legal actions in exchange for a cut of the awards. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the choices taken by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that schemes to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on climate commitments. The incoming administration then withdrew the permission the former government had granted. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the corporations bringing the case.

Last August, a company whose final controllers are located in the offshore financial centre lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. We have little idea how much this might be. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Challenge

On the same day that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case at present, but it seems likely that he’ll use the ISDS mechanism to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has already started suing another European state with similar intent, claiming $16bn: an amount representing half nation's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Costs

We were assured that these events wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this topic described campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That prediction has come to pass. Recently, oil and gas and mining firms have initiated a historic level of cases against nations rich and poor, challenging – similar to the Whitehaven project – official measures to stop global warming. Companies have so far won $114bn via ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP