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How do you reckon our democratic process works? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law are enforced by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Advent of Offshore Tribunals

In the modern era, international firms, along with the billionaires behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, including companies based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, even billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The government could be forced to drop the legislation. It will be hesitant to passing future laws in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Record numbers of legal actions are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions taken by elected bodies is that this stipulation has been written – without public consent, and often in conditions of total confidentiality – inside trade treaties.

A Real-World Instance: The UK Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The justice found that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government subsequently revoked the licence the former government had granted. Now, this victory faces being overturned by an foreign court accountable to no one but the entities bringing the case.

Last August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was set up to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had been allowed to proceed. We have no clear indication how much this sum represents. Who is representing it challenging the British government? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration passes a law, the high court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a elected official represents its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it seems likely that he may employ the ISDS mechanism to fight the restrictions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg with similar intent, demanding $16bn: equivalent to half of nation's yearly income. Among the counsel on his side? the wife of a former prime minister, spouse of the previous PM.

Trade specialists believe that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with widespread derision.

That prediction has now materialised. In the current period, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – government attempts to prevent environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP