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What is your perceive our democratic process works? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that was how it operated in the past. No longer.

The Rise of Offshore Courts

Nowadays, international firms, or the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even companies based in this country. Access is granted only to corporations operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation represent not real financial harm but compensation the tribunal officials decide the company could potentially have made. The administration could be forced to drop the legislation. It becomes discouraged from introducing similar legislation along the same lines, for fear of being sued.

A System Running Rampant

Record numbers of disputes are being filed, as firms observe each other, and private equity finance suits for a share of a cut of the settlements. The outcome? Sovereignty and democratic governance are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices made by parliaments is that this clause has been incorporated – absent public approval, and typically amid an atmosphere of extreme secrecy – into trade treaties.

A Real-World Example: The UK Coal Mine

Twelve months ago, activists won a great victory at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The new government then withdrew the consent the Tories had issued. Currently, this success faces being overturned by an offshore tribunal reporting to only the entities filing the suit.

During August, a corporate entity whose final controllers are located in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to commence operations. We have little idea how much this might be. Who is acting on its behalf in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case at present, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK imposed on him following the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: an amount representing half government’s annual revenue. Included in the legal team representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these events could not occur. Previously, a government leader, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter labelled activists of “alarmism … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Warnings that “when companies start to realise the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were met with scepticism.

That threat has come to pass. Recently, oil and gas and mining firms have lodged a unprecedented number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP