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Can you reckon our democratic process operates? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that was how it operated in the past. No longer.

The Advent of Offshore Tribunals

In the modern era, international firms, or the billionaires that control them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. The general public are unable to file a case to them, just as our government, or even companies headquartered in this country. The door is open exclusively to entities based overseas.

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

These sums constitute not actual losses but funds the tribunal officials determine the company might otherwise have made. The administration may have to abandon its policy. It becomes deterred from enacting future policies in that area, worried about being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as companies learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the awards. The outcome? Sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions made by elected bodies is that this stipulation has been inserted – without democratic mandate, and often in an atmosphere of total confidentiality – into trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the high court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government then withdrew the licence the Tories had granted. Today, this success faces being overturned by an secret arbitration panel answering to only the entities petitioning it.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. What legal team is representing it against the British government? An elected representative, and previous senior legal advisor in the previous government, the noted patriot the MP. The administration enacts a policy, the high court supports it, then a foreign company challenges it through an undemocratic private court, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation for this reason, seeking a colossal sum: an amount representing half nation's yearly income. Part of the lawyers on his side? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s hesitation in leveraging immobilised Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

The public was told that such things could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” An adviser on this topic accused activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the power bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That threat has come to pass. Recently, energy and mining firms have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – government attempts to halt global warming. Companies have to date won vast sums through ISDS, of which oil majors have secured the majority. That equates to the combined GDP