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Can you perceive our democratic process operates? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills become law. The law is maintained by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Rise of Offshore Courts

Today, international firms, along with the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. The door is open solely for corporations registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

These awards constitute not actual losses but compensation the panel members determine the company could potentially have made. The administration may have to drop the legislation. It is deterred from enacting future policies of a similar nature, due to the risk of being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations take cues from each other, and hedge funds finance suits for a share of a cut of the takings. The result? Sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede a country's own laws and the choices enacted by elected bodies is that this clause has been written – absent public approval, and typically amid a climate of profound opacity – within international trade agreements.

A Real-World Case: The UK Coalmine

A year ago, activists won a great victory at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The incoming administration later cancelled the permission the former government had approved. Now, this success is under threat by an foreign court answering to no one but the corporations bringing the case.

During August, a corporate entity whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

This firm is suing the UK for the money it could have earned if the mine had been allowed to commence operations. We have no idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he’ll use the arbitration process to fight the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against a small nation for this reason, seeking sixteen billion dollars: an amount representing half state's yearly income. Among the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars contend that the EU’s procrastination in utilising seized state funds as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Costs

The public was told that these events could not occur. Years ago, a government leader, promoting the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations begin to understand the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That warning has now materialised. This year, energy and extraction companies have initiated a historic level of cases against nations both wealthy and developing, contesting – like the example of the UK mine – official measures to prevent climate breakdown. Corporations have so far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP