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What is your understand our democratic process functions? Maybe similar to this. We elect MPs. They vote on bills. When a majority is secured, the bills pass into law. The law is upheld by the courts. That's it. Yet, that was how it once functioned. Those days are over.

The Advent of Offshore Tribunals

Nowadays, overseas companies, or the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these bodies provide no avenue for appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. The door is open exclusively to corporations based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but money the arbitrators determine the company could potentially have made. The state could be forced to abandon its policy. It is hesitant to enacting future policies of a similar nature, worried about being sued.

A Process Growing Exponentially

Historically high figures of disputes are being brought, as corporations learn from each other, and hedge funds finance suits in exchange for a portion of the settlements. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the rulings made by legislatures is that this stipulation has been written – without public consent, and typically amid a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Whitehaven Coalmine

Last year, activists won a great victory at the high court. The judge determined that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the bizarre claim that the mine would have no impact on climate commitments. The incoming administration then withdrew the permission the previous administration had approved. Now, this victory could be compromised by an foreign court answering to exclusively the corporations petitioning it.

During August, a corporate entity whose final controllers are based in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have no idea how much this might be. Who is acting on its behalf challenging the UK administration? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Challenge

Simultaneously that the court on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case at present, but it seems likely that he may employ the arbitration process to contest the penalties the UK enacted against him subsequent to the Russian aggression. He has already filed a claim against Luxembourg for this reason, demanding a colossal sum: equivalent to half of state's yearly budget. Included in the legal team on his side? a prominent lawyer, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as guarantee for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that such things could not occur. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this topic accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Warnings that “as corporations grasp the authority they now possess, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent global warming. Firms have to date won vast sums through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP