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Can you understand our democratic process operates? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Emergence of Offshore Courts

In the modern era, overseas companies, or the billionaires that control them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of commercial attorneys. Such disputes take place behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, running into billions.

These sums are based not on real financial harm but funds the panel members decide the company might otherwise have made. The administration might be compelled to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as companies learn from each other, and investment funds finance suits in return for a portion of the awards. The result? Sovereignty and popular rule are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – within bilateral investment treaties.

A Real-World Case: The UK Coalmine

Last year, environmental campaigners won a great victory at the high court. The judge found that schemes to excavate the first new deep coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Currently, this victory could be compromised by an foreign court accountable to only the companies bringing the case.

During August, a company whose final controllers are based in the Cayman Islands initiated proceedings versus the UK government. Recently a arbitration panel in the US capital was established to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has little idea how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity challenges it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

The Russian Challenge

On the same day that the panel on the mining lawsuit was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he will utilise the arbitration process to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios could not occur. In 2014, a government leader, advocating for the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade agreement after trade deal and there has never been a issue in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by general mockery.

That warning has now materialised. In the current period, oil and gas and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to stop climate breakdown. Companies have thus far won $114bn via ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP