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Can you understand our democratic process operates? It could be similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

Today, overseas companies, along with the wealthy individuals that control them, have the power to sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place in secret. Unlike our courts, these bodies provide no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even companies based in this country. They are open only to entities registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

This compensation represent not tangible damages but money the panel members conclude the company might otherwise have made. The administration may have to drop the legislation. It is deterred from passing future laws along the same lines, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies take cues from each other, and hedge funds fund legal actions in exchange for a cut of the settlements. The consequence? National sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices made by legislatures is that this clause has been inserted – absent public approval, and typically amid conditions of profound opacity – into international trade agreements.

A Specific Instance: The Cumbrian Coalmine

A year ago, a conservation group won a great victory at the senior court. The justice found that schemes to dig the first new deep coal mine in the UK for three decades, in northwest England, were illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the permission the previous administration had approved. Currently, this success could be compromised by an foreign court answering to exclusively the corporations petitioning it.

In August, a firm whose beneficial owners are located in the offshore financial centre initiated proceedings against the UK government. Last week a arbitration panel in the United States was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this might be. Which individual is serving as its counsel against the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the domestic court supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the court on the mining lawsuit was appointed, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it is highly possible that he may employ the arbitration process to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: equivalent to half of nation's yearly budget. Among the counsel representing him there? Cherie Blair, spouse of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Threats

Politicians promised that these scenarios could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this matter accused critics of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with scepticism.

That threat has now materialised. Recently, fossil fuel and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – state efforts to halt global warming. Firms have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP