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Can you understand our democratic process operates? Perhaps similar to this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, and the billionaires that control them, can sue nation states for the regulations they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. You or I cannot take a case to them, just as our government, including companies headquartered in this country. Access is granted only to businesses registered abroad.

If a tribunal rules that a law or policy might diminish the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These sums represent not actual losses but funds the tribunal officials conclude the company might otherwise have made. The state might be compelled to drop the legislation. It becomes discouraged from enacting future policies of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of cases are being filed, as companies learn from each other, and investment funds bankroll lawsuits for a share of a portion of the takings. The outcome? Sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the decisions made by elected bodies is that this provision has been inserted – without public consent, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have no consequence on climate commitments. The new government later cancelled the consent the previous administration had issued. Today, this legal outcome could be compromised by an foreign court reporting to only the entities filing the suit.

During August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in the US capital was established to consider the case.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has no idea how much this might be. Which individual is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coalmine case was appointed, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it seems likely that he’ll use the tribunal to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against another European state for this reason, demanding $16bn: equivalent to half of government’s yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that these events could not occur. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this topic accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. In the current period, oil and gas and resource corporations have filed a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Firms have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP