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Can you perceive our democratic process operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Rise of Offshore Courts

Today, international firms, along with the wealthy individuals who own them, are able to litigate against elected administrations for the regulations they pass, at private courts composed of business advocates. These proceedings are conducted in secret. In contrast to domestic courts, these bodies grant no right of appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies operating from this country. The door is open only to businesses registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award financial penalties of vast sums, running into billions.

These awards constitute not actual losses but money the arbitrators conclude the company could potentially have made. The state might be compelled to drop the legislation. It will be discouraged from introducing similar legislation along the same lines, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and investment funds finance suits in return for a portion of the takings. The consequence? National sovereignty and democratic governance are now unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede a country's own laws and the choices made by legislatures is that this stipulation has been incorporated – without democratic mandate, and frequently under an atmosphere of extreme secrecy – inside international trade agreements.

A Specific Example: The UK Coalmine

Last year, activists won a great victory at the High Court. The judge determined that proposals to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the licence the former government had approved. Now, this victory is under threat by an offshore tribunal answering to only the corporations petitioning it.

During August, a company whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. Recently a tribunal in the US capital was convened to consider the case.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. The public has no idea how much this might be. What legal team is representing it challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Case

On the same day that the court on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has previously started suing Luxembourg for this reason, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the legal team acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts argue that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the funds Ukraine desperately needs.

Misleading Claims and Growing Threats

The public was told that these events wouldn’t happen. In 2014, a former prime minister, promoting the largest and riskiest of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with widespread derision.

That threat is now a reality. This year, oil and gas and mining firms have lodged a record number of cases against nations rich and poor, challenging – similar to the UK mine – official measures to halt global warming. Corporations have to date won $114bn via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP