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Can you reckon our democratic process functions? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Advent of Offshore Courts

In the modern era, international firms, along with the oligarchs who own them, have the power to sue governments for the policies they pass, at private courts staffed by commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these tribunals provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to corporations based overseas.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it may order financial penalties of vast sums, even billions.

This compensation represent not tangible damages but money the arbitrators decide the company might otherwise have made. The administration might be compelled to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as corporations learn from each other, and investment funds finance suits in exchange for a share of the takings. The result? Sovereignty and democratic governance are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede national legislation and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and frequently under a climate of total confidentiality – within trade treaties.

A Real-World Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that proposals to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government later cancelled the permission the Tories had approved. Today, this success could be compromised by an offshore tribunal reporting to no one but the entities filing the suit.

In August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this sum represents. Who is acting on its behalf in opposition to the state? An elected representative, and former attorney-general in the previous government, that great patriot the MP. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Case

On the same day that the panel on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it seems likely that he may employ the tribunal to fight the sanctions the UK enacted against him after the Russian aggression. He has previously initiated proceedings against another European state with similar intent, seeking a colossal sum: an amount representing half government’s yearly budget. Part of the legal team representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that such things could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” A consultant on this topic described critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “as corporations grasp the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That warning is now a reality. In the current period, energy and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Whitehaven project – government attempts to prevent global warming. Firms have so far won $114bn through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP