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Can you understand our democratic process functions? It could be similar to this. We elect MPs. They vote on bills. Should a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that’s how it operated in the past. Those days are over.

The Rise of Offshore Tribunals

In the modern era, overseas companies, and the oligarchs who own them, have the power to sue nation states for the policies they pass, at private courts composed of business advocates. Such disputes are held behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or legal review. You or I are barred from bringing a case to them, just as our government, including businesses operating from this country. The door is open solely for businesses based overseas.

When a secret court determines that a government measure may compromise the corporation’s projected profits, it may order compensation of vast sums, running into billions.

This compensation constitute not actual losses but funds the arbitrators determine the company might otherwise have made. The government might be compelled to drop the legislation. It is discouraged from enacting future policies in that area, worried about facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being initiated, as companies observe each other, and investment funds bankroll lawsuits in return for a portion of the takings. The result? Sovereignty and democratic governance are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions taken by legislatures is that this stipulation has been written – without democratic mandate, and often in a climate of profound opacity – into international trade agreements.

A Real-World Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer determined that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the previous government, which had endorsed the questionable argument that the mine would have no consequence on our carbon budgets. The new government then withdrew the consent the previous administration had issued. Today, this victory could be compromised by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

This firm is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. The public has no clear indication how much this might be. What legal team is representing it in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the high court supports it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case so far, but it seems likely that he will utilise the tribunal to fight the penalties the UK enacted against him following the Russian aggression. He has already started suing another European state on these grounds, claiming $16bn: equivalent to half of government’s yearly budget. Among the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Risks

We were assured that such things were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” A consultant on this issue accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “once firms begin to understand the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has now materialised. Recently, energy and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP