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What is your understand our democratic process functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. Simple as that. Yet, that was how it used to work. No longer.

The Emergence of Offshore Courts

Nowadays, overseas companies, or the wealthy individuals behind them, can sue nation states for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. They are open solely for businesses operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.

This compensation represent not tangible damages but compensation the arbitrators decide the company would perhaps have made. The state may have to abandon its policy. It is deterred from enacting future policies of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies take cues from each other, and private equity fund legal actions for a share of a portion of the awards. The result? Sovereignty and popular rule are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions made by elected bodies is that this stipulation has been incorporated – without democratic mandate, and often in conditions of profound opacity – within trade treaties.

A Real-World Instance: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the High Court. The judge ruled that proposals to excavate the first major coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government subsequently revoked the consent the former government had granted. Currently, this legal outcome could be compromised by an offshore tribunal reporting to exclusively the corporations bringing the case.

During August, a company whose ultimate owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was set up to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Which individual is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The state makes a decision, the national judiciary supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him after the Russian aggression. He has previously initiated proceedings against Luxembourg with similar intent, seeking $16bn: an amount representing half state's yearly income. Included in the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen state funds as security for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a former prime minister, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this matter described critics of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction has come to pass. In the current period, oil and gas and resource corporations have lodged a historic level of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained the majority. That equates to the combined GDP