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How do you understand our democratic process operates? Maybe something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. Statutes are enforced by the courts. End of story. However, that used to be how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, along with the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by business advocates. These proceedings are held behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. They are open solely for corporations based overseas.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These awards are based not on actual losses but funds the panel members decide the company might otherwise have made. The government could be forced to abandon its policy. It becomes deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and private equity finance suits for a share of a cut of the awards. The consequence? Sovereignty and democratic governance are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the choices made by parliaments is that this provision has been written – without democratic mandate, and typically amid a climate of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on national carbon targets. The new government later cancelled the permission the previous administration had approved. Currently, this victory could be compromised by an foreign court accountable to no one but the entities bringing the case.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Last week a arbitration panel in the United States was set up to hear it.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. We have no idea how much this sum represents. Who is representing it against the state? A sitting MP, and ex-law officer in the Conservative government, that great patriot the MP. The government makes a decision, the high court supports it, then a international entity challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case to date, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK imposed on him following the Russian aggression. He has already started suing Luxembourg with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as guarantee for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade deal upon trade deal and there has not been a issue in the past.” An expert on this issue labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That prediction has come to pass. This year, oil and gas and extraction companies have filed a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – official measures to stop global warming. Firms have so far won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP