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How do you understand our democratic process operates? It could be something like this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. Simple as that. Well, that’s how it once functioned. No longer.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, along with the wealthy individuals that control them, can sue nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are held in secret. Unlike our courts, these panels allow no right of appeal or oversight by judges. The general public are barred from bringing a case to them, nor can our government, including businesses based in this country. They are open only to corporations based overseas.

If a tribunal finds that a legislative action may compromise the corporation’s expected profits, it may order compensation of vast sums, running into billions.

These awards represent not real financial harm but money the tribunal officials conclude the company might otherwise have made. The government might be compelled to abandon its policy. It becomes hesitant to enacting future policies along the same lines, for fear of facing litigation.

A System Growing Exponentially

Record numbers of legal actions are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The result? National sovereignty and popular rule are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings enacted by parliaments is that this stipulation has been written – without democratic mandate, and frequently under conditions of total confidentiality – within international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The justice ruled that proposals to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the licence the former government had granted. Currently, this success is under threat by an offshore tribunal accountable to only the companies filing the suit.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the United States was convened to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had received permission to commence operations. The public has little idea how much this might be. Which individual is serving as its counsel in opposition to the British government? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration passes a law, the high court validates it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the court on the coalmine case was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it seems likely that he may employ the arbitration process to contest the restrictions the UK enacted against him following the invasion of Ukraine. He has previously started suing Luxembourg for this reason, seeking a colossal sum: half that nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Costs

We were assured that such things wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade deal upon trade deal and there has not been a case in the past.” An adviser on this issue accused activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. This year, oil and gas and resource corporations have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Companies have so far won $114bn by using ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP