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How do you understand our democratic process functions? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, along with the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are held behind closed doors. Differing from national judiciaries, these panels allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises based in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards represent not real financial harm but compensation the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It will be deterred from enacting future policies along the same lines, for fear of being sued.

A Process Running Rampant

Historically high figures of cases are being initiated, as firms take cues from each other, and private equity finance suits in exchange for a share of the takings. The consequence? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the choices made by parliaments is that this clause has been written – absent public approval, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Real-World Case: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The justice determined that proposals to open the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The new government then withdrew the licence the Tories had issued. Today, this legal outcome faces being overturned by an foreign court accountable to no one but the entities filing the suit.

In August, a firm whose final controllers are based in the offshore financial centre filed a lawsuit challenging the UK government. Recently a dispute settlement body in Washington DC was set up to consider the case.

This firm is suing the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have little idea how much this might be. Who is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The administration enacts a policy, the high court supports it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it seems likely that he will utilise the tribunal to contest the penalties the UK enacted against him subsequent to the war in Ukraine. He has already initiated proceedings against a small nation for this reason, demanding sixteen billion dollars: half that government’s yearly income. Among the legal team representing him there? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement upon trade deal and we have never seen a case in the past.” A consultant on this topic accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by ISDS claims. Predictions that “once firms start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That warning has come to pass. In the current period, oil and gas and resource corporations have lodged a historic level of suits against nations rich and poor, challenging – similar to the Whitehaven project – official measures to stop environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP