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What is your understand our democratic process functions? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, or the oligarchs who own them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies operating from this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards represent not actual losses but compensation the tribunal officials determine the company could potentially have made. The administration may have to rescind the measure. It is hesitant to enacting future policies of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? Democratic sovereignty and democratic governance are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the rulings taken by parliaments is that this provision has been incorporated – absent public approval, and often in a climate of extreme secrecy – inside trade treaties.

A Real-World Example: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The Labour government later cancelled the licence the Tories had granted. Now, this success is under threat by an offshore tribunal answering to only the entities petitioning it.

During August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. Recently a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had received permission to go ahead. We have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking a colossal sum: an amount representing half nation's yearly income. Included in the counsel representing him there? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Threats

We were assured that these events were not possible. Years ago, a senior politician, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An adviser on this issue labelled campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction is now a reality. Recently, fossil fuel and resource corporations have initiated a record number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have so far won vast sums through ISDS, of which energy giants have secured the majority. That equates to the combined GDP