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How do you perceive our democratic process functions? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

Today, foreign corporations, and the wealthy individuals behind them, can sue governments for the regulations they pass, at private courts staffed by commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

These sums are based not on real financial harm but funds the tribunal officials determine the company could potentially have made. The government may have to rescind the measure. It will be discouraged from passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and hedge funds bankroll lawsuits in return for a cut of the settlements. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions made by legislatures is that this stipulation has been incorporated – absent public approval, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration later cancelled the consent the previous administration had granted. Now, this victory could be compromised by an offshore tribunal reporting to exclusively the entities bringing the case.

During August, a company whose final controllers are based in the tax haven initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. We have no idea how much this sum represents. Who is serving as its counsel against the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Case

On the same day that the panel on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it is highly possible that he’ll use the tribunal to contest the penalties the UK levied against him following the Russian aggression. He has previously started suing a small nation for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Among the lawyers representing him there? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s delay in utilising seized state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

We were assured that such things were not possible. Previously, a government leader, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” An adviser on this issue described campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about such legal actions. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by general mockery.

That prediction has now materialised. In the current period, oil and gas and mining firms have initiated a unprecedented number of claims against nations rich and poor, opposing – like the example of the UK mine – state efforts to halt climate breakdown. Firms have so far won $114bn through ISDS, of which energy giants have obtained the majority. That represents the combined GDP