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Can you understand our system of government functions? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that’s how it operated in the past. No longer.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, and the wealthy individuals who own them, are able to litigate against governments for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held in secret. Unlike our courts, these bodies provide no right of appeal or judicial review. Ordinary citizens are barred from bringing a case to them, just as our government, including businesses operating from this country. The door is open exclusively to corporations operating from foreign soil.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

This compensation constitute not tangible damages but money the arbitrators determine the company might otherwise have made. The state may have to drop the legislation. It becomes deterred from passing future laws in that area, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a share of the awards. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the rulings taken by legislatures is that this stipulation has been written – without public consent, and frequently under a climate of total confidentiality – inside international trade agreements.

A Concrete Example: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The justice found that plans to open the first major coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the licence the Tories had granted. Now, this success could be compromised by an foreign court reporting to no one but the corporations filing the suit.

In August, a company whose final controllers reside in the Cayman Islands initiated proceedings against the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

This firm is litigating against the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have no clear indication how much this could amount to. Who is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know little of the case so far, but it is highly possible that he’ll use the tribunal to contest the sanctions the UK imposed on him after the war in Ukraine. He has already started suing another European state with similar intent, claiming a colossal sum: half that government’s yearly income. Among the lawyers representing him there? the wife of a former prime minister, married to the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' 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 trade agreement. This remarkable, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

Empty Promises and Mounting Risks

We were assured that these scenarios were not possible. In 2014, a senior politician, championing the biggest and most dangerous of all such treaties, declared: “We’ve signed trade deal upon trade deal and there has never been a case in the past.” An expert on this topic described campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “as corporations grasp the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with widespread derision.

That threat has now materialised. In the current period, oil and gas and resource corporations have filed a record number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have to date won vast sums via ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP