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How do you reckon our democratic process functions? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills become law. The law is upheld by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, and the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at private courts made up of business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. They are open only to entities registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s expected profits, it can award compensation of vast sums, even billions.

These sums constitute not tangible damages but money the tribunal officials conclude the company might otherwise have made. The state could be forced to drop the legislation. It will be hesitant to introducing similar legislation along the same lines, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being initiated, as corporations learn from each other, and private equity fund legal actions for a share of a portion of the takings. The consequence? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings made by elected bodies is that this provision has been inserted – without public consent, and frequently under an atmosphere of extreme secrecy – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, activists won a great victory at the senior court. The judge ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the consent the previous administration had issued. Now, this success could be compromised by an offshore tribunal accountable to no one but the companies petitioning it.

Last August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim challenging the UK government. Last week a tribunal in Washington DC was convened to hear it.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to go ahead. The public has little idea how much this might be. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coal mine dispute was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to contest the penalties the UK levied against him following the invasion of Ukraine. He has previously started suing Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Among the counsel on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in leveraging immobilised Russian assets as security for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that these events were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An expert on this matter described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning is now a reality. In the current period, fossil fuel and mining firms have initiated a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP