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How do you perceive our democratic process operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation are enforced by the courts. End of story. Yet, that’s how it used to work. Those days are over.

The Emergence of Offshore Courts

Today, international firms, and the billionaires who own them, can sue governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including companies based in this country. They are open only to businesses based overseas.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it has the power to grant compensation of vast sums, potentially billions.

This compensation constitute not tangible damages but money the arbitrators decide the company could potentially have made. The state might be compelled to rescind the measure. It is deterred from enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of disputes are being filed, as corporations observe each other, and investment funds fund legal actions for a share of a cut of the takings. The consequence? Democratic sovereignty and popular rule are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings made by elected bodies is that this provision has been written – without democratic mandate, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the high court. The judge ruled that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have zero effect on national carbon targets. The Labour government later cancelled the permission the Tories had approved. Now, this legal outcome could be compromised by an offshore tribunal reporting to no one but the entities filing the suit.

In August, a corporate entity whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to go ahead. Citizens have little idea how much this sum represents. Which individual is representing it challenging the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK levied against him following the Russian aggression. He has previously started suing Luxembourg for this reason, claiming sixteen billion dollars: half that nation's yearly income. Among the legal team acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as collateral for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments could be blocking the money Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that these events could not occur. In 2014, a government leader, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade agreement upon trade deal and there has never been a case in the past.” An adviser on this issue accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations start to realise the power they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. This year, oil and gas and resource corporations have lodged a historic level of claims against nations rich and poor, opposing – similar to the Whitehaven project – government attempts to stop global warming. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP