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What is your understand our democratic process functions? Perhaps something like this. The public votes for MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

Nowadays, international firms, along with the wealthy individuals behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals staffed by corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these bodies provide no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. Access is granted exclusively to corporations registered abroad.

If a tribunal rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards constitute not real financial harm but funds the tribunal officials conclude the company might otherwise have made. The state could be forced to abandon its policy. It is discouraged from passing future laws of a similar nature, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as corporations learn from each other, and private equity fund legal actions in return for a portion of the takings. The consequence? Sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the choices taken by legislatures is that this clause has been inserted – without public consent, and often in conditions of profound opacity – inside international trade agreements.

A Concrete Case: The UK Coalmine

A year ago, activists won a great victory at the high court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The new government later cancelled the licence the former government had granted. Today, this legal outcome faces being overturned by an foreign court reporting to only the corporations petitioning it.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had received permission to proceed. We have little idea how much this might be. Which individual is serving as its counsel against the state? An elected representative, and ex-law officer in the Conservative government, that great patriot the MP. The government enacts a policy, the high court upholds it, then a foreign company challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was established, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case to date, but it appears probable that he may employ the arbitration process to fight the restrictions the UK levied against him following the Russian aggression. He has previously started suing another European state on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly budget. Among the lawyers acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as guarantee for its financial support package stems from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these events could not occur. In 2014, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a case in the past.” A consultant on this matter labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations start to realise the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That warning has come to pass. In the current period, energy and extraction companies have initiated a record number of claims against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP