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What is your understand our democratic process functions? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Rise of Offshore Courts

In the modern era, international firms, or the billionaires who own them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even companies operating from this country. The door is open solely for corporations based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the arbitrators determine the company might otherwise have made. The state might be compelled to drop the legislation. It will be hesitant to enacting future policies in that area, for fear of being sued.

A Process Growing Exponentially

Record numbers of disputes are being initiated, as firms take cues from each other, and investment funds fund legal actions in exchange for a portion of the takings. The outcome? National sovereignty and popular rule are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the decisions made by legislatures is that this clause has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – into trade treaties.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge ruled that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have had no impact on national carbon targets. The Labour government then withdrew the permission the previous administration had approved. Today, this victory is under threat by an offshore tribunal answering to only the entities filing the suit.

During August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. Citizens have no idea how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and ex-law officer in the previous government, the noted patriot the MP. The administration passes a law, the domestic court upholds it, then a foreign company contests it through an secretive offshore tribunal, and a sitting MP works for its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him following the Russian aggression. He has already filed a claim against a small nation for this reason, claiming a colossal sum: half that state's yearly budget. Among the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Costs

Politicians promised that these scenarios could not occur. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this topic labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat has now materialised. Recently, energy and mining firms have initiated a historic level of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP