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What is your reckon our democratic process functions? It could be along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Emergence of Secret Tribunals

Today, overseas companies, or the oligarchs behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes are held behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises based in this country. They are open only to businesses registered abroad.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation represent not real financial harm but funds the panel members decide the company might otherwise have made. The administration could be forced to rescind the measure. It is deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Unprecedented levels of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of total confidentiality – inside international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice determined that schemes to open the first new deep coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The new government then withdrew the permission the former government had granted. Now, this legal outcome faces being overturned by an foreign court answering to exclusively the companies filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was established to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the state? A member of parliament, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the penalties the UK enacted against him after the invasion of Ukraine. He has already filed a claim against a small nation on these grounds, demanding $16bn: an amount representing half government’s annual revenue. Among the counsel acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these events wouldn’t happen. In 2014, a government leader, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and there has never been a case in the past.” An expert on this topic labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and extraction companies have initiated a record number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to prevent global warming. Firms have thus far won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP