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Can you perceive our democratic process functions? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that used to be how it operated in the past. No longer.

The Emergence of Offshore Courts

Today, overseas companies, along with the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at private courts composed of business advocates. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted exclusively to entities based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

These sums represent not actual losses but compensation the arbitrators conclude the company would perhaps have made. The administration could be forced to abandon its policy. It will be deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being brought, as firms observe each other, and investment funds finance suits in return for a cut of the awards. The outcome? Democratic sovereignty and democracy are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the choices enacted by parliaments is that this stipulation has been inserted – without democratic mandate, and often in conditions of extreme secrecy – into trade treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that schemes to dig the first deep coalmine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on our carbon budgets. The new government then withdrew the consent the Tories had granted. Now, this success is under threat by an foreign court reporting to exclusively the entities petitioning it.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the US capital was convened to consider the case.

The company is suing the UK for the profits it might have made if the mine had received permission to go ahead. The public has no clear indication how much this could amount to. Who is acting on its behalf against the British government? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case so far, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK imposed on him after the Russian aggression. He has previously filed a claim against Luxembourg for this reason, demanding $16bn: an amount representing half nation's annual revenue. Among the legal team acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Escalating Costs

Politicians promised that these events could not occur. Years ago, a former prime minister, championing the most significant and hazardous of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this topic labelled activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations start to realise the influence they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That warning is now a reality. Recently, oil and gas and extraction companies have lodged a unprecedented number of suits against nations both wealthy and developing, challenging – as in the case of the UK mine – government attempts to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP