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How do you understand our democratic process works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. Statutes is upheld by the courts. That's it. However, that was how it used to work. Not anymore.

The Rise of Offshore Tribunals

In the modern era, international firms, along with the wealthy individuals who own them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, including companies based in this country. They are open solely for businesses operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These awards represent not real financial harm but funds the arbitrators decide the company would perhaps have made. The state may have to abandon its policy. It becomes hesitant to introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations observe each other, and private equity bankroll lawsuits in return for a share of the settlements. The consequence? Democratic sovereignty and popular rule are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the rulings taken by elected bodies is that this provision has been written – without democratic mandate, and typically amid a climate of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Whitehaven Coal Mine

Last year, activists secured a significant win at the senior court. The judge determined that proposals to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the licence the previous administration had approved. Now, this success could be compromised by an secret arbitration panel accountable to exclusively the corporations petitioning it.

In August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The company is litigating against the UK for the profits it could have earned if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, that great patriot the MP. The administration enacts a policy, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it seems likely that he may employ the arbitration process to contest the penalties the UK imposed on him subsequent to the invasion of Ukraine. He has already filed a claim against another European state on these grounds, demanding $16bn: an amount representing half nation's annual revenue. Part of the legal team acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that such things could not occur. Previously, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An expert on this matter labelled activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “as corporations grasp the power they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. Recently, energy and mining firms have initiated a historic level of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to prevent climate breakdown. Companies have to date won $114bn by using ISDS, of which energy giants have secured the majority. That represents the combined GDP