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How do you reckon our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Rise of Offshore Tribunals

In the modern era, international firms, and the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of business advocates. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including businesses operating from this country. The door is open solely for businesses operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, potentially billions.

These awards constitute not actual losses but money the arbitrators decide the company would perhaps have made. The administration could be forced to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, worried about being sued.

A System Running Rampant

Record numbers of legal actions are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede a country's own laws and the rulings taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under an atmosphere of profound opacity – within trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the senior court. The justice ruled that proposals to open the first major coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The Labour government subsequently revoked the permission the former government had approved. Today, this victory is under threat by an offshore tribunal reporting to exclusively the companies filing the suit.

During August, a firm whose final controllers are located in the tax haven lodged a claim versus the UK government. Recently a tribunal in the United States was established to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no idea how much this might be. Which individual is representing it against the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot Geoffrey Cox. The state passes a law, the national judiciary upholds it, then a foreign company disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know little of the case to date, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against a small nation on these grounds, demanding sixteen billion dollars: half that government’s yearly income. Part of the legal team acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these scenarios could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this topic accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were dismissed with general mockery.

That prediction has come to pass. This year, fossil fuel and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – government attempts to stop climate breakdown. Companies have to date won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP