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What is your perceive our democratic process works? Maybe similar to this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that used to be how it used to work. Those days are over.

The Advent of Offshore Courts

Nowadays, international firms, and the wealthy individuals that control them, are able to litigate against governments for the laws they pass, at private courts staffed by corporate lawyers. The cases are held behind closed doors. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even companies operating from this country. Access is granted solely for entities registered abroad.

When a secret court determines that a legislative action could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

This compensation constitute not real financial harm but money the tribunal officials determine the company might otherwise have made. The state may have to drop the legislation. It will be hesitant to passing future laws along the same lines, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of disputes are being brought, as corporations take cues from each other, and private equity fund legal actions for a share of a share of the awards. The outcome? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the rulings made by legislatures is that this clause has been written – without public consent, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Concrete Instance: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that proposals to dig the first new deep coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The incoming administration then withdrew the licence the former government had granted. Currently, this success is under threat by an secret arbitration panel reporting to exclusively the corporations filing the suit.

Last August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was convened to hear it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. Citizens have no idea how much this could amount to. Which individual is representing it against the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a foreign company challenges it through an secretive private court, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the panel on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. The public knows little of the case so far, but it appears probable that he will utilise the ISDS mechanism to fight the restrictions the UK levied against him subsequent to the war in Ukraine. He has already initiated proceedings against another European state with similar intent, demanding a colossal sum: half that government’s yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Threats

Politicians promised that these events were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An adviser on this issue labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with widespread derision.

That warning has now materialised. Recently, energy and mining firms have filed a historic level of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – government attempts to stop environmental catastrophe. Firms have so far won vast sums by using ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP