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What is your perceive our democratic process works? Maybe similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. End of story. Well, that’s how it once functioned. No longer.

The Advent of Offshore Courts

Nowadays, international firms, or the wealthy individuals who own them, can sue governments for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases are held behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or judicial review. You or I are unable to file a case to them, nor can our government, including businesses based in this country. The door is open exclusively to corporations registered abroad.

If a tribunal finds that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

This compensation represent not tangible damages but compensation the tribunal officials conclude the company would perhaps have made. The state could be forced to drop the legislation. It will be hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of cases are being initiated, as companies take cues from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The consequence? Democratic sovereignty and popular rule are becoming unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the rulings enacted by elected bodies is that this clause has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that schemes to open the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have no impact on national carbon targets. The Labour government subsequently revoked the consent the Tories had approved. Currently, this legal outcome faces being overturned by an secret arbitration panel accountable to no one but the entities petitioning it.

During August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was established to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this could amount to. Which individual is serving as its counsel against the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court upholds it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are nothing of the case at present, but it is highly possible that he’ll use the ISDS mechanism to challenge the penalties the UK levied against him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of state's yearly income. Among the lawyers on his side? a prominent lawyer, married to the previous PM.

Legal experts contend that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Growing Risks

The public was told that such things wouldn’t happen. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a issue in the past.” An adviser on this topic accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat has come to pass. Recently, energy and resource corporations have lodged a record number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to prevent climate breakdown. Companies have thus far won vast sums by using ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP