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Can you perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. The law is maintained by the courts. That's it. Yet, that’s how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

In the modern era, international firms, and the oligarchs behind them, can sue governments for the regulations they pass, at private courts made up of business advocates. Such disputes are held behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. You or I are unable to file a case to them, just as our government, or even enterprises headquartered in this country. Access is granted only to corporations registered abroad.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it has the power to grant damages of vast sums, even billions.

This compensation constitute not tangible damages but funds the tribunal officials decide the company could potentially have made. The state may have to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being initiated, as firms observe each other, and private equity fund legal actions in exchange for a portion of the settlements. The consequence? Sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override domestic law and the rulings made by legislatures is that this provision has been written – without public consent, and frequently under conditions of extreme secrecy – into international trade agreements.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Today, this success is under threat by an secret arbitration panel reporting to exclusively the companies petitioning it.

Last August, a company whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

The company is suing the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf against the state? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a international entity disputes it through an unaccountable private court, and a elected official represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. The public knows scarce of the case at present, but it seems likely that he will utilise the tribunal to contest the restrictions the UK levied against him following the invasion of Ukraine. He has previously initiated proceedings against a small nation with similar intent, demanding $16bn: half that nation's annual revenue. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine desperately needs.

Misleading Claims and Growing Threats

Politicians promised that these events were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to trade agreement upon trade deal and there has not been a issue in the past.” An expert on this matter accused campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Predictions that “once firms start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. Recently, oil and gas and resource corporations have lodged a record number of cases against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to stop global warming. Corporations have to date won vast sums via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP