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What is your reckon our democratic process works? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that was how it once functioned. Those days are over.

The Emergence of Shadow Arbitration Panels

Today, international firms, and the billionaires behind them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by business advocates. The cases are conducted in secret. Unlike our courts, these panels provide no opportunity to appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including enterprises operating from this country. They are open solely for corporations operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s projected profits, it may order compensation of hundreds of millions, even billions.

This compensation represent not real financial harm but funds the tribunal officials decide the company would perhaps have made. The government could be forced to rescind the measure. It becomes hesitant to enacting future policies along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The outcome? Sovereignty and democratic governance are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the senior court. The justice found that proposals to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The incoming administration then withdrew the permission the Tories had granted. Currently, this victory could be compromised by an offshore tribunal reporting to no one but the corporations petitioning it.

In August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was established to consider the case.

The claimant is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Which individual is serving as its counsel challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court validates it, then a overseas corporation disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know scarce of the case so far, but it appears probable that he’ll use the arbitration process to fight the penalties the UK imposed on him following the war in Ukraine. He has initiated proceedings against another European state on these grounds, claiming $16bn: an amount representing half nation's yearly income. Part of the counsel on his side? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as guarantee for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

We were assured that these events were not possible. Years ago, a government leader, championing the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this issue described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies start to realise the authority they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with scepticism.

That threat has come to pass. In the current period, energy and resource corporations have initiated a record number of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to stop global warming. Companies have to date won $114bn by using ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP