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How do you reckon our democratic process operates? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Rise of Offshore Courts

Nowadays, international firms, and the oligarchs that control them, have the power to sue nation states for the policies they pass, at private courts staffed by business advocates. The cases are held behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. Access is granted solely for corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

These sums represent not tangible damages but money the panel members determine the company might otherwise have made. The state could be forced to abandon its policy. It will be hesitant to passing future laws along the same lines, worried about being sued.

A Process Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The outcome? National sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the rulings taken by parliaments is that this provision has been inserted – without democratic mandate, and typically amid a climate of extreme secrecy – into international trade agreements.

A Real-World Case: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that plans to dig the first deep coalmine in the UK for three decades, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the permission the Tories had issued. Currently, this success could be compromised by an secret arbitration panel reporting to exclusively the corporations bringing the case.

Last August, a firm whose beneficial owners are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. We have no clear indication how much this might be. Who is acting on its behalf in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it appears probable that he may employ the arbitration process to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has previously filed a claim against a small nation on these grounds, demanding sixteen billion dollars: half that nation's yearly budget. Included in the lawyers on his side? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in utilising seized state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Mounting Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, told us: “The UK has signed trade deal upon trade deal and there has never been a case in the past.” An expert on this matter labelled activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. This year, fossil fuel and extraction companies have lodged a unprecedented number of suits against nations rich and poor, challenging – like the example of the UK mine – state efforts to halt environmental catastrophe. Firms have so far won $114bn through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP