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Can you perceive our democratic process operates? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Advent of Offshore Courts

In the modern era, overseas companies, along with the wealthy individuals who own them, can sue governments for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are conducted behind closed doors. Unlike our courts, these tribunals provide no right of appeal or legal review. The general public are barred from bringing a case to them, just as our government, including companies based in this country. Access is granted only to businesses based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it may order compensation of vast sums, running into billions.

These sums constitute not actual losses but compensation the tribunal officials decide the company might otherwise have made. The government may have to rescind the measure. It becomes hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Running Rampant

Record numbers of cases are being filed, as corporations observe each other, and hedge funds fund legal actions for a share of a cut of the takings. The outcome? National sovereignty and democratic governance are turning into too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump domestic law and the choices enacted by legislatures is that this clause has been incorporated – without democratic mandate, and often in a climate of total confidentiality – into bilateral investment treaties.

A Real-World Example: The Cumbrian 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 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government subsequently revoked the consent the former government had granted. Now, this legal outcome could be compromised by an offshore tribunal answering to only the entities petitioning it.

During August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was convened to consider the case.

The company is suing the UK for the money it would have generated if the mine had been allowed to go ahead. Citizens have no idea how much this sum represents. What legal team is representing it against the British government? A member of parliament, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court validates it, then a overseas corporation disputes it through an secretive offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was convened, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case at present, but it appears probable that he’ll use the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, seeking $16bn: equivalent to half of state's annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that such things wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this topic accused activists of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That threat has now materialised. In the current period, fossil fuel and extraction companies have lodged a record number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to halt climate breakdown. Firms have so far won vast sums by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP