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Can you reckon our democratic process operates? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law are enforced by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, international firms, along with the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even businesses operating from this country. They are open solely for corporations based overseas.

When a secret court determines that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

This compensation are based not on tangible damages but compensation the tribunal officials determine the company might otherwise have made. The state could be forced to drop the legislation. It will be discouraged from enacting future policies along the same lines, worried about facing litigation.

A System Growing Exponentially

Record numbers of disputes are being filed, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a cut of the awards. The consequence? Democratic sovereignty and popular rule are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices taken by legislatures is that this provision has been incorporated – absent public approval, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government then withdrew the consent the former government had issued. Currently, this legal outcome is under threat by an foreign court accountable to exclusively the entities filing the suit.

In August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was set up to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no idea how much this sum represents. Which individual is acting on its behalf challenging the state? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case at present, but it seems likely that he’ll use the tribunal to challenge the restrictions the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its financial support package arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

Misleading Claims and Growing Risks

Politicians promised that such things were not possible. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An adviser on this topic described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were greeted by widespread derision.

That prediction is now a reality. This year, fossil fuel and resource corporations have lodged a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the Whitehaven project – state efforts to prevent environmental catastrophe. Firms have thus far won $114bn through ISDS, of which fossil fuel companies have secured $84bn. That equates to the combined GDP