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What is your understand our democratic process works? Perhaps along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that’s how it once functioned. No longer.

The Emergence of Offshore Tribunals

Today, foreign corporations, and the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, just as our government, including enterprises based in this country. The door is open only to businesses registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not actual losses but compensation the panel members conclude the company could potentially have made. The government could be forced to drop the legislation. It becomes hesitant to passing future laws along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and investment funds finance suits in return for a portion of the takings. The result? National sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions made by legislatures is that this provision has been incorporated – without democratic mandate, and typically amid a climate of profound opacity – within trade treaties.

A Real-World Instance: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The judge found that schemes to open the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration subsequently revoked the consent the previous administration had approved. Currently, this legal outcome is under threat by an offshore tribunal accountable to only the companies bringing the case.

During August, a firm whose ultimate owners reside in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was set up to hear it.

The claimant is suing the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. What legal team is representing it challenging the state? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the high court upholds it, then a foreign company contests it through an secretive private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Simultaneously that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it appears probable that he may employ the arbitration process to challenge the penalties the UK enacted against him following the Russian aggression. He has initiated proceedings against a small nation with similar intent, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the counsel representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Threats

Politicians promised that such things were not possible. In 2014, a government leader, advocating for the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” An expert on this topic described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Predictions that “when companies grasp the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. This year, energy and resource corporations have lodged a record number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – official measures to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP