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Can you perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that used to be how it used to work. Those days are over.

The Rise of Offshore Tribunals

Nowadays, international firms, or the oligarchs that control them, have the power to sue nation states for the laws they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These sums are based not on actual losses but money the arbitrators decide the company would perhaps have made. The administration could be forced to rescind the measure. It becomes deterred from enacting future policies along the same lines, for fear of facing litigation.

A Process Running Rampant

Historically high figures of disputes are being initiated, as companies learn from each other, and investment funds fund legal actions in exchange for a portion of the awards. The result? Sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions taken by parliaments is that this clause has been written – without public consent, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Specific Example: The UK Coalmine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer determined that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration then withdrew the consent the Tories had approved. Currently, this victory faces being overturned by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

The claimant is litigating against the UK for the money it would have generated if the mine had been allowed to go ahead. We have no idea how much this could amount to. What legal team is representing it challenging the British government? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the domestic court validates it, then a international entity contests it through an unaccountable private court, and a elected official works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it is highly possible that he will utilise the tribunal to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, seeking $16bn: equivalent to half of state's yearly income. Among the lawyers representing him there? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s delay in utilising seized oligarchs' funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

Misleading Claims and Escalating Threats

We were assured that such things wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” An expert on this matter described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states needed to fear these lawsuits. Predictions that “when companies start to realise the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with widespread derision.

That warning has now materialised. In the current period, oil and gas and extraction companies have lodged a record number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – official measures to prevent climate breakdown. Companies have to date won vast sums via ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP