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How do you perceive our democratic process works? It could be something like this. Citizens choose MPs. They legislate on bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. End of story. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, along with the billionaires behind them, are able to litigate against governments for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses based in this country. They are open only to corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

These sums are based not on real financial harm but money the tribunal officials decide the company might otherwise have made. The administration could be forced to rescind the measure. It becomes hesitant to enacting future policies along the same lines, worried about being sued.

A Process Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms learn from each other, and investment funds bankroll lawsuits for a share of a share of the awards. The consequence? National sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings enacted by elected bodies is that this provision has been incorporated – without public consent, and typically amid conditions of profound opacity – within trade treaties.

A Concrete Instance: The UK Coalmine

Last year, environmental campaigners won a great victory at the High Court. The justice ruled that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, had been illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration later cancelled the licence the Tories had issued. Currently, this success is under threat by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. Last week a tribunal in the US capital was established to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. What legal team is representing it in opposition to the state? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration makes a decision, the high court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it appears probable that he’ll use the tribunal to contest the sanctions the UK levied against him following the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half nation's yearly income. Included in the legal team on his side? the wife of a former prime minister, married to the ex-UK leader.

Legal experts contend that the EU’s procrastination in utilising seized state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Years ago, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this issue accused activists of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That prediction has now materialised. Recently, fossil fuel and mining firms have filed a historic level of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – official measures to prevent global warming. Corporations have to date won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP