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What is your understand our democratic process operates? Maybe along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Rise of Offshore Courts

Nowadays, overseas companies, along with the wealthy individuals that control them, can sue governments for the laws they pass, at offshore tribunals made up of commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, including companies based in this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s expected profits, it can award damages of vast sums, even billions.

These awards represent not tangible damages but compensation the tribunal officials decide the company might otherwise have made. The state could be forced to rescind the measure. It will be discouraged from enacting future policies in that area, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being brought, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The consequence? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the choices made by legislatures is that this stipulation has been written – absent public approval, and typically amid conditions of profound opacity – within trade treaties.

A Real-World Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The justice determined that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The Labour government subsequently revoked the licence the former government had granted. Now, this success could be compromised by an foreign court accountable to only the corporations petitioning it.

Last August, a firm whose final controllers are based in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in the US capital was convened to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been allowed to commence operations. We have no clear indication how much this sum represents. What legal team is representing it challenging the UK administration? A member of parliament, and ex-law officer in the previous government, that great patriot the MP. The administration makes a decision, the domestic court upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Simultaneously that the court on the coal mine dispute was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against Luxembourg on these grounds, claiming a colossal sum: half that nation's yearly income. Part of the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that these scenarios were not possible. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An expert on this matter described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations should be concerned by such legal actions. Cautionary notes that “when companies grasp the authority they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and mining firms have initiated a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – official measures to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP