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Can you perceive our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that used to be how it used to work. Those days are over.

The Advent of Offshore Courts

Today, international firms, or the billionaires who own them, can sue governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies operating from this country. Access is granted only to businesses based overseas.

Should an arbitration panel rules that a government measure might diminish the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These awards represent not tangible damages but compensation the panel members decide the company could potentially have made. The government could be forced to drop the legislation. It is hesitant to enacting future policies in that area, worried about being sued.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations observe each other, and private equity fund legal actions in return for a cut of the settlements. The outcome? National sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists won a great victory at the High Court. The judge ruled that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the permission the Tories had issued. Today, this success faces being overturned by an offshore tribunal answering to only the entities filing the suit.

In August, a firm whose ultimate owners are located in the offshore financial centre filed a lawsuit against the UK government. Last week a tribunal in Washington DC was established to hear it.

The company is suing the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this might be. What legal team is serving as its counsel against the UK administration? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it appears probable that he’ll use the arbitration process to contest the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing a small nation on these grounds, seeking sixteen billion dollars: half that nation's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists believe that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Escalating Costs

We were assured that these events were not possible. In 2014, a government leader, promoting the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” An adviser on this topic described activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That prediction is now a reality. Recently, energy and extraction companies have lodged a unprecedented number of claims against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP