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How do you reckon our democratic process functions? Maybe along the lines of this. We elect MPs. They legislate on bills. Should a majority is obtained, the bills become law. Statutes is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

In the modern era, international firms, and the oligarchs behind them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held in secret. Differing from national judiciaries, these tribunals allow no right of appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, or even businesses based in this country. The door is open exclusively to entities registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on actual losses but funds the arbitrators conclude the company could potentially have made. The state could be forced to abandon its policy. It will be hesitant to introducing similar legislation along the same lines, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being filed, as companies learn from each other, and private equity finance suits for a share of a portion of the takings. The consequence? Sovereignty and popular rule are becoming prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the decisions made by parliaments is that this stipulation has been written – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the high court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the consent the Tories had approved. Currently, this legal outcome could be compromised by an offshore tribunal reporting to only the companies filing the suit.

In August, a corporate entity whose final controllers are located in the tax haven filed a lawsuit challenging the UK government. Recently a tribunal in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot the MP. The government makes a decision, the domestic court upholds it, then a international entity challenges it through an undemocratic private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the mining lawsuit was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case to date, but it seems likely that he may employ the tribunal to fight the penalties the UK imposed on him after the Russian aggression. He has filed a claim against a small nation with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Among the counsel representing him there? the wife of a former prime minister, married to the former British prime minister.

International law scholars believe that the EU’s hesitation in using frozen state funds as collateral for its financial support package stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over sovereign states could be blocking the money Ukraine critically depends on.

Empty Promises and Escalating Risks

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning is now a reality. This year, fossil fuel and resource corporations have initiated a record number of claims against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to stop environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP