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How do you perceive our democratic process functions? It could be similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. That's it. However, that used to be how it operated in the past. Not anymore.

The Rise of Offshore Courts

Nowadays, foreign corporations, along with the billionaires behind them, have the power to sue elected administrations for the policies they pass, at private courts composed of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even enterprises operating from this country. Access is granted exclusively to entities registered abroad.

When a secret court rules that a government measure could harm the corporation’s expected profits, it may order financial penalties of hundreds of millions, even billions.

These sums constitute not tangible damages but money the panel members conclude the company would perhaps have made. The government might be compelled to abandon its policy. It is discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A System Running Rampant

Record numbers of disputes are being filed, as corporations observe each other, and private equity fund legal actions for a share of a cut of the takings. The consequence? National sovereignty and democratic governance are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the choices taken by legislatures is that this clause has been inserted – absent public approval, and often in a climate of profound opacity – into international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The judge determined that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had issued. Now, this victory faces being overturned by an foreign court reporting to only the entities filing the suit.

During August, a company whose beneficial owners are based in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to commence operations. The public has little idea how much this might be. What legal team is acting on its behalf against the state? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The administration enacts a policy, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it seems likely that he will utilise the arbitration process to fight the restrictions the UK imposed on him following the Russian aggression. He has initiated proceedings against another European state with similar intent, seeking $16bn: equivalent to half of state's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” A consultant on this issue described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Predictions that “when companies begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have lodged a record number of claims against nations rich and poor, challenging – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have thus far won vast sums by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP