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How do you understand our democratic process operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. The law is maintained by the courts. That's it. Yet, that was how it once functioned. No longer.

The Emergence of Secret Courts

In the modern era, international firms, and the oligarchs who own them, can sue nation states for the regulations they pass, at offshore tribunals made up of commercial attorneys. The cases take place in secret. Differing from national judiciaries, these tribunals allow no right of appeal or judicial review. The general public cannot take a case to them, just as our government, or even businesses based in this country. The door is open only to businesses operating from foreign soil.

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

These sums represent not tangible damages but funds the tribunal officials decide the company might otherwise have made. The state could be forced to abandon its policy. It becomes discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A System Running Rampant

Record numbers of legal actions are being brought, as corporations learn from each other, and private equity finance suits in exchange for a share of the takings. The consequence? National sovereignty and democracy are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override a country's own laws and the decisions taken by legislatures is that this stipulation has been written – without democratic mandate, and often in conditions of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge ruled that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the bizarre claim that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the consent the previous administration had issued. Today, this legal outcome faces being overturned by an offshore tribunal answering to no one but the companies filing the suit.

In August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the United States was set up to consider the case.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. What legal team is representing it in opposition to the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court upholds it, then a international entity contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the court on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of nation's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s hesitation in utilising seized Russian assets as security for its financial support package stems from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments may be obstructing the money Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that these scenarios could not occur. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this issue labelled campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations needed to fear these lawsuits. Predictions that “once firms grasp the influence they now possess, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That threat has now materialised. This year, energy and extraction companies have filed a record number of suits against nations both wealthy and developing, opposing – as in the case of the UK mine – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP