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Can you perceive our democratic process operates? Maybe something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, and the oligarchs who own them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels composed of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, and neither can our government, or even companies based in this country. They are open exclusively to entities based overseas.

When a secret court rules that a government measure may compromise the corporation’s expected profits, it can award damages of vast sums, even billions.

These sums constitute not tangible damages but funds the arbitrators conclude the company could potentially have made. The state may have to drop the legislation. It becomes deterred from passing future laws in that area, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies learn from each other, and hedge funds fund legal actions for a share of a share of the takings. The consequence? Democratic sovereignty and democratic governance are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings made by elected bodies is that this provision has been incorporated – absent public approval, and often in conditions of profound opacity – inside trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice found that plans to open the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The Labour government then withdrew the consent the former government had approved. Today, this victory could be compromised by an foreign court answering to exclusively the entities bringing the case.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Recently a arbitration panel in Washington DC was established to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. What legal team is serving as its counsel challenging the state? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case at present, but it is highly possible that he’ll use the tribunal to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding a colossal sum: equivalent to half of state's yearly income. Included in the legal team on his side? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s delay in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over sovereign states might be preventing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Previously, a government leader, championing the largest and riskiest of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this matter described campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “once firms grasp the influence they now possess, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That warning is now a reality. This year, oil and gas and resource corporations have filed a historic level of cases against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Companies have so far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP