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Can you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills become law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

Nowadays, foreign corporations, along with the wealthy individuals behind them, can sue governments for the regulations they pass, at private courts composed of corporate lawyers. The cases are held in secret. Unlike our courts, these panels provide no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted exclusively to corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s projected profits, it may order damages of hundreds of millions, even billions.

This compensation represent not real financial harm but funds the tribunal officials determine the company could potentially have made. The administration may have to drop the legislation. It is hesitant to introducing similar legislation in that area, due to the risk of being sued.

A Process Running Rampant

Record numbers of cases are being initiated, as companies learn from each other, and hedge funds finance suits in exchange for a share of the takings. The outcome? National sovereignty and democracy are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the decisions taken by legislatures is that this clause has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, a conservation group achieved a major legal triumph at the high court. The justice found that plans to dig 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 extraordinary assertion that the mine could have zero effect on climate commitments. The Labour government then withdrew the consent the former government had issued. Today, this legal outcome is under threat by an secret arbitration panel answering to only the entities filing the suit.

In August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in the United States was set up to adjudicate on it.

The company is suing the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Who is acting on its behalf in opposition to the British government? An elected representative, and ex-law officer in the previous government, that great patriot the MP. The administration enacts a policy, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the tribunal to challenge the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing another European state on these grounds, claiming $16bn: half that nation's annual revenue. Included in the legal team on his side? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s hesitation in utilising seized Russian assets as guarantee for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that these events were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter described campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with scepticism.

That prediction is now a reality. This year, oil and gas and resource corporations have filed a historic level of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – government attempts to halt environmental catastrophe. Corporations have so far won vast sums via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP