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Can you perceive our democratic process functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law is upheld by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

Today, foreign corporations, and the oligarchs behind them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases are conducted away from public scrutiny. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even companies based in this country. The door is open only to corporations registered abroad.

When a secret court rules that a government measure could harm the corporation’s projected profits, it can award damages of hundreds of millions of pounds, even billions.

This compensation are based not on actual losses but funds the panel members decide the company could potentially have made. The government might be compelled to rescind the measure. It is discouraged from passing future laws of a similar nature, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being filed, as corporations learn from each other, and investment funds fund legal actions for a share of a cut of the awards. The consequence? Sovereignty and popular rule are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the decisions taken by legislatures is that this provision has been inserted – without democratic mandate, and often in conditions of profound opacity – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The justice ruled that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The new government later cancelled the permission the previous administration had issued. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to only the corporations petitioning it.

During August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has no idea how much this might be. Who is representing it in opposition to the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The state passes a law, the national judiciary validates it, then a international entity challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

Concurrently that the court on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK levied against him after the Russian aggression. He has initiated proceedings against Luxembourg with similar intent, claiming a colossal sum: an amount representing half nation's annual revenue. Part of the lawyers acting for him in that case? a prominent lawyer, wife of the previous PM.

Trade specialists argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that these events wouldn’t happen. Previously, a senior politician, advocating for the largest and riskiest of all these agreements, stated: “The UK has signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this issue described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations begin to understand the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That warning has now materialised. Recently, oil and gas and extraction companies have filed a unprecedented number of cases against nations rich and poor, opposing – similar to the Cumbrian coalmine – official measures to prevent global warming. Corporations have to date won vast sums through ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP