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How do you understand our democratic process works? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is upheld by the courts. End of story. Well, that’s how it once functioned. Not anymore.

The Rise of Offshore Courts

Today, foreign corporations, or the billionaires who own them, can sue elected administrations for the regulations they pass, at offshore tribunals composed of corporate lawyers. The cases are held behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, including enterprises operating from this country. Access is granted solely for corporations based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, running into billions.

These awards represent not actual losses but money the arbitrators conclude the company could potentially have made. The state might be compelled to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A System Growing Exponentially

Unprecedented levels of disputes are being filed, as firms observe each other, and private equity finance suits in return for a portion of the awards. The result? Sovereignty and democracy are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions enacted by parliaments is that this clause has been written – absent public approval, and often in an atmosphere of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Whitehaven Coalmine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge determined that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government later cancelled the licence the former government had approved. Currently, this success faces being overturned by an offshore tribunal answering to no one but the entities filing the suit.

During August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in the United States was set up to consider the case.

This firm is suing the UK for the money it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is representing it in opposition to the British government? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration makes a decision, the high court supports it, then a international entity challenges it through an unaccountable arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him following the Russian aggression. He has started suing Luxembourg on these grounds, demanding a colossal sum: half that government’s annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that these scenarios were not possible. Previously, a government leader, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue described critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “once firms grasp the authority they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat has come to pass. Recently, fossil fuel and extraction companies have lodged a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That represents the combined GDP