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How do you perceive our democratic process operates? It could be similar to this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, international firms, along with the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at private courts composed of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these bodies provide no avenue for appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even companies headquartered in this country. The door is open solely for entities based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

These awards constitute not actual losses but funds the arbitrators determine the company would perhaps have made. The state may have to rescind the measure. It is deterred from enacting future policies in that area, worried about facing litigation.

A System Running Rampant

Historically high figures of cases are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits in return for a cut of the takings. The consequence? Sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings made by legislatures is that this provision has been written – absent public approval, and often in a climate of total confidentiality – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group won a great victory at the high court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The Labour government subsequently revoked the permission the Tories had issued. Now, this legal outcome could be compromised by an secret arbitration panel answering to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are located in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this might be. Which individual is acting on its behalf challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the arbitration process to fight the sanctions the UK imposed on him after the war in Ukraine. He has started suing Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half nation's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts argue that the EU’s procrastination in utilising seized state funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that such things wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An expert on this topic labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms start to realise the power they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with widespread derision.

That threat is now a reality. In the current period, energy and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP