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What is your reckon our democratic process functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these bodies grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises headquartered in this country. Access is granted solely for corporations operating from foreign soil.

When a secret court finds that a government measure could harm the corporation’s expected profits, it may order compensation of vast sums, potentially billions.

These awards represent not actual losses but compensation the arbitrators determine the company would perhaps have made. The state might be compelled to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of disputes are being initiated, as companies observe each other, and investment funds fund legal actions in return for a portion of the settlements. The outcome? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the rulings enacted by elected bodies is that this provision has been written – absent public approval, and typically amid conditions of extreme secrecy – within international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Last year, a conservation group secured a significant win at the High Court. The justice determined that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the licence the former government had granted. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

Last August, a corporate entity whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have no idea how much this might be. Who is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he may employ the arbitration process to challenge the restrictions the UK imposed on him after the war in Ukraine. He has already started suing Luxembourg for this reason, claiming a colossal sum: equivalent to half of state's yearly income. Part of the counsel on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts argue that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, advocating for the biggest and most dangerous of all these agreements, stated: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” An adviser on this topic labelled activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations had to worry about such legal actions. Warnings that “when companies start to realise the authority they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That prediction has come to pass. This year, oil and gas and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Firms have thus far won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP