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How do you reckon our democratic process works? It could be something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. That's it. Yet, that used to be how it used to work. Those days are over.

The Rise of Offshore Tribunals

Nowadays, international firms, along with the billionaires that control them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals allow no avenue for appeal or judicial review. You or I are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. The door is open solely for corporations registered abroad.

If a tribunal finds that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards constitute not real financial harm but compensation the arbitrators decide the company would perhaps have made. The government might be compelled to rescind the measure. It is discouraged from passing future laws along the same lines, due to the risk of facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as corporations observe each other, and investment funds fund legal actions for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the decisions enacted by parliaments is that this provision has been incorporated – without public consent, and often in an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The justice ruled that schemes to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government then withdrew the permission the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal reporting to no one but the corporations bringing the case.

In August, a company whose final controllers are located in the tax haven lodged a claim challenging the UK government. Recently a tribunal in the United States was established to consider the case.

The claimant is suing the UK for the revenue it would have generated if the mine had received permission to proceed. We have no idea how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state passes a law, the high court upholds it, then a foreign company challenges it through an secretive arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Case

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case so far, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK enacted against him subsequent to the Russian aggression. He has filed a claim against another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Among the lawyers representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its financial support package arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that these scenarios wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this matter described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “when companies begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That prediction has come to pass. This year, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Companies have so far won vast sums by using ISDS, of which oil majors have obtained eighty-four billion dollars. That represents the combined GDP