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What is your understand our democratic process operates? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. However, that was how it once functioned. Those days are over.

The Emergence of Offshore Arbitration Panels

In the modern era, foreign corporations, along with the billionaires who own them, can sue nation states for the policies they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted in secret. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open solely for entities registered abroad.

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

This compensation constitute not actual losses but compensation the panel members decide the company might otherwise have made. The administration might be compelled to drop the legislation. It will be discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being brought, as firms learn from each other, and hedge funds finance suits for a share of a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the decisions enacted by legislatures is that this clause has been inserted – absent public approval, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, activists secured a significant win at the high court. The judge found that proposals to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the permission the Tories had granted. Today, this victory faces being overturned by an offshore tribunal answering to only the entities petitioning it.

In August, a firm whose final controllers are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. Who is serving as its counsel challenging the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a international entity disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Case

On the same day that the court on the coalmine case was appointed, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it appears probable that he will utilise the arbitration process to contest the restrictions the UK enacted against him following the war in Ukraine. He has previously started suing another European state for this reason, seeking sixteen billion dollars: half that nation's yearly income. Among the counsel acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the money Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these scenarios were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “when companies grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That warning is now a reality. This year, energy and mining firms have initiated a record number of cases against nations across the economic spectrum, contesting – similar to the UK mine – official measures to prevent environmental catastrophe. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP