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How do you perceive our democratic process operates? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. Simple as that. However, that’s how it once functioned. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, and the billionaires that control them, can sue nation states for the laws they pass, at offshore tribunals staffed by business advocates. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, including companies based in this country. Access is granted solely for businesses operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it can award compensation of vast sums, running into billions.

This compensation represent not tangible damages but compensation the arbitrators determine the company would perhaps have made. The administration may have to rescind the measure. It becomes discouraged from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being filed, as companies take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the decisions made by legislatures is that this clause has been incorporated – absent public approval, and frequently under conditions of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer determined that plans to open the first major coal mine in the UK for a generation, in Cumbria, had been wrongly permitted by the previous government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The Labour government then withdrew the consent the Tories had issued. Currently, this victory is under threat by an offshore tribunal reporting to only the entities bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. Who is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a international entity contests it through an secretive offshore tribunal, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case so far, but it appears probable that he may employ the ISDS mechanism to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming sixteen billion dollars: half that government’s annual revenue. Included in the counsel acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as collateral for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Threats

Politicians promised that these events could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this issue accused campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That prediction is now a reality. In the current period, energy and mining firms have lodged a historic level of claims against nations rich and poor, challenging – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP