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What is your perceive our democratic process operates? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that was how it operated in the past. No longer.

The Rise of Offshore Courts

In the modern era, overseas companies, along with the oligarchs who own them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by corporate lawyers. The cases take place behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses operating from this country. The door is open solely for entities registered abroad.

When a secret court rules that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, running into billions.

These awards are based not on tangible damages but compensation the arbitrators conclude the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as firms learn from each other, and hedge funds bankroll lawsuits for a share of a portion of the awards. The consequence? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices enacted by elected bodies is that this clause has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within trade treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge ruled that schemes to open the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The Labour government then withdrew the permission the Tories had issued. Currently, this legal outcome faces being overturned by an foreign court answering to only the entities bringing the case.

During August, a firm whose final controllers are located in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to adjudicate on it.

The company is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have little idea how much this could amount to. Who is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The state passes a law, the national judiciary supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it is highly possible that he may employ the tribunal to fight the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of state's yearly income. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over sovereign states could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that these events could not occur. Previously, a former prime minister, championing the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this issue accused activists of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “when companies begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning has now materialised. In the current period, energy and resource corporations have filed a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to halt global warming. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP