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How do you perceive our democratic process functions? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, along with the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts composed of business advocates. These proceedings take place away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or judicial review. You or I cannot take a case to them, just as our government, including companies operating from this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but compensation the panel members decide the company would perhaps have made. The government may have to drop the legislation. It will be deterred from introducing similar legislation along the same lines, for fear of being sued.

A Process Growing Exponentially

Historically high figures of disputes are being initiated, as companies observe each other, and investment funds finance suits in exchange for a portion of the settlements. The consequence? Sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the choices made by parliaments is that this stipulation has been inserted – without public consent, and typically amid conditions of total confidentiality – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The justice found that schemes to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The Labour government later cancelled the licence the former government had granted. Now, this success could be compromised by an foreign court accountable to only the corporations filing the suit.

Last August, a firm whose beneficial owners are located in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in Washington DC was convened to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. Which individual is serving as its counsel against the UK administration? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the high court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it seems likely that he will utilise the arbitration process to challenge the sanctions the UK levied against him following the war in Ukraine. He has previously filed a claim against another European state on these grounds, seeking sixteen billion dollars: an amount representing half nation's yearly income. Among the counsel on his side? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s procrastination in utilising seized oligarchs' funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a trade agreement. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that such things wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all these agreements, told us: “The UK has signed trade deal after trade deal and we have never seen a case in the past.” A consultant on this matter accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by ISDS claims. Cautionary notes that “as corporations begin to understand the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning has now materialised. In the current period, energy and resource corporations have filed a historic level of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to prevent environmental catastrophe. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP