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How do you perceive our democratic process functions? It could be something like this. We elect MPs. They legislate on bills. If a majority is obtained, the bills become law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, international firms, along with the billionaires that control them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. These proceedings are held in secret. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s expected profits, it can award damages of vast sums, running into billions.

This compensation are based not on actual losses but funds the panel members decide the company would perhaps have made. The government could be forced to drop the legislation. It will be hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Running Rampant

Historically high figures of cases are being brought, as corporations observe each other, and private equity fund legal actions for a share of a portion of the takings. The result? Democratic sovereignty and democratic governance are turning into unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings enacted by elected bodies is that this clause has been written – absent public approval, and often in a climate of extreme secrecy – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The presiding officer ruled that schemes to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had no impact on climate commitments. The new government then withdrew the licence the Tories had approved. Today, this victory faces being overturned by an offshore tribunal reporting to only the companies bringing the case.

During August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings versus the UK government. Recently a dispute settlement body in Washington DC was established to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. We have little idea how much this might be. What legal team is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court supports it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case to date, but it seems likely that he’ll use the tribunal to contest the penalties the UK enacted against him subsequent to the invasion of Ukraine. He has already filed a claim against another European state with similar intent, claiming a colossal sum: an amount representing half nation's yearly income. Part of the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

Legal experts contend that the EU’s hesitation in using frozen Russian assets as collateral for its financial support package stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade deal after trade deal and there has not been a issue in the past.” An expert on this matter accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations grasp the influence they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with general mockery.

That warning has now materialised. This year, oil and gas and extraction companies have initiated a historic level of cases against nations across the economic spectrum, challenging – similar to the UK mine – state efforts to halt climate breakdown. Companies have so far won vast sums through ISDS, of which energy giants have obtained $84bn. That represents the combined GDP