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How do you reckon our democratic process operates? Perhaps similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. End of story. However, that used to be how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, or the oligarchs behind them, are able to litigate against elected administrations for the policies they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or judicial review. The general public 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 corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These awards represent not real financial harm but money the arbitrators determine the company would perhaps have made. The state could be forced to drop the legislation. It becomes discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of cases are being initiated, as firms take cues from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions taken by parliaments is that this stipulation has been inserted – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The justice found that plans to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the permission the former government had granted. Currently, this victory is under threat by an secret arbitration panel accountable to only the corporations petitioning it.

During August, a company whose final controllers reside in the tax haven filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was established to hear it.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no idea how much this could amount to. What legal team is serving as its counsel against the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case so far, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK enacted against him after the war in Ukraine. He has previously filed a claim against a small nation with similar intent, seeking $16bn: an amount representing half nation's yearly income. Part of the lawyers representing him there? Cherie Blair, wife of the previous PM.

International law scholars argue that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement upon trade deal and we have never seen a problem in the past.” An expert on this matter labelled critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with widespread derision.

That prediction is now a reality. In the current period, energy and mining firms have lodged a historic level of cases against nations across the economic spectrum, challenging – similar to the Whitehaven project – state efforts to halt global warming. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP