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Can you perceive our democratic process functions? It could be similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. Yet, that’s how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

In the modern era, overseas companies, along with the billionaires behind them, can sue elected administrations for the policies they pass, at private courts composed of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals provide no right of appeal or oversight by judges. You or I are unable to file a case to them, nor can our government, including enterprises operating from this country. The door is open only to corporations based overseas.

If a tribunal finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums constitute not actual losses but funds the panel members decide the company might otherwise have made. The state might be compelled to abandon its policy. It is discouraged from passing future laws in that area, for fear of being sued.

A System Growing Exponentially

Unprecedented levels of disputes are being filed, as companies observe each other, and hedge funds bankroll lawsuits in return for a cut of the awards. The outcome? Sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the choices taken by parliaments is that this provision has been written – without democratic mandate, and typically amid conditions of profound opacity – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the high court. The justice determined that plans to open the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The incoming administration later cancelled the consent the former government had granted. Now, this success faces being overturned by an secret arbitration panel answering to no one but the entities filing the suit.

In August, a firm whose beneficial owners are located in the tax haven lodged a claim against the UK government. The previous week a tribunal in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. What legal team is serving as its counsel challenging the UK administration? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a international entity challenges it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him following the Russian aggression. He has initiated proceedings against another European state on these grounds, demanding $16bn: an amount representing half nation's yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Mounting Costs

Politicians promised that such things were not possible. Previously, a government leader, championing the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An adviser on this issue described activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “when companies start to realise the influence they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That prediction is now a reality. Recently, oil and gas and extraction companies have initiated a historic level of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to prevent climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP