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How do you reckon our democratic process functions? Perhaps something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Advent of Offshore Courts

Nowadays, international firms, along with the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels made up of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these panels provide no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. They are open solely for entities based overseas.

Should an arbitration panel finds that a government measure may compromise the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but compensation the panel members conclude the company could potentially have made. The administration might be compelled to rescind the measure. It becomes hesitant to passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of cases are being brought, as companies observe each other, and investment funds fund legal actions for a share of a share of the awards. The outcome? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions made by elected bodies is that this provision has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – inside international trade agreements.

A Specific Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the High Court. The judge determined that proposals to open the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government then withdrew the licence the previous administration had approved. Now, this legal outcome could be compromised by an secret arbitration panel reporting to only the companies bringing the case.

During August, a firm whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. Last week a dispute settlement body in the United States was set up to adjudicate on it.

The company is suing the UK for the money it might have made if the mine had been allowed to proceed. Citizens have little idea how much this might be. Who is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court upholds it, then a foreign company disputes it through an secretive arbitration panel, and a elected official works for its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it appears probable that he may employ the arbitration process to fight the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing another European state for this reason, seeking a colossal sum: half that government’s annual revenue. Among the lawyers acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s procrastination in utilising seized Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that these events wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a case in the past.” An adviser on this topic accused activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations had to worry about such legal actions. Warnings that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That threat is now a reality. This year, oil and gas and extraction companies have initiated a record number of cases against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP