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How do you perceive our democratic process functions? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. Well, that was how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, and the oligarchs who own them, have the power to sue governments for the policies they pass, at private courts composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these tribunals allow no opportunity to appeal or legal review. You or I are unable to file a case to them, nor can our government, or even enterprises based in this country. Access is granted solely for corporations operating from foreign soil.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but compensation the panel members conclude the company might otherwise have made. The government could be forced to abandon its policy. It will be hesitant to enacting future policies along the same lines, for fear of incurring a lawsuit.

A Process Spiralling Out of Control

Record numbers of legal actions are being brought, as companies learn from each other, and investment funds bankroll lawsuits in return for a cut of the awards. The result? Sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the decisions enacted by parliaments is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of extreme secrecy – within international trade agreements.

A Real-World Example: The UK Coalmine

Last year, activists achieved a major legal triumph at the senior court. The judge found that schemes to dig the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the permission the previous administration had approved. Currently, this victory faces being overturned by an offshore tribunal accountable to only the companies petitioning it.

In August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings versus the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is representing it in opposition to the state? A sitting MP, and former attorney-general in the outgoing administration, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court supports it, then a overseas corporation disputes it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK imposed on him following the Russian aggression. He has previously filed a claim against a small nation for this reason, seeking a colossal sum: equivalent to half of state's yearly budget. Part of the lawyers acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s delay in using frozen oligarchs' funds as security for its financial support package arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these events wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a issue in the past.” An expert on this matter described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That warning has now materialised. This year, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the UK mine – state efforts to halt climate breakdown. Firms have to date won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP