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How do you perceive our democratic process functions? Maybe along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills become law. The law are enforced by the courts. Simple as that. Well, that used to be how it used to work. No longer.

The Emergence of Offshore Courts

Today, international firms, along with the billionaires behind them, have the power to sue nation states for the laws they pass, at private courts composed of business advocates. These proceedings are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even enterprises operating from this country. The door is open only to corporations registered abroad.

When a secret court determines that a government measure could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation constitute not tangible damages but compensation the arbitrators decide the company could potentially have made. The government might be compelled to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, for fear of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and private equity bankroll lawsuits in return for a portion of the settlements. The consequence? Sovereignty and democracy are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the choices made by elected bodies is that this provision has been incorporated – without public consent, and often in an atmosphere of extreme secrecy – within international trade agreements.

A Specific Instance: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the senior court. The judge found that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had granted. Today, this victory faces being overturned by an secret arbitration panel answering to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. Recently a tribunal in the United States was set up to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been permitted to proceed. We have no clear indication how much this sum represents. What legal team is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the previous government, that great patriot the MP. The administration makes a decision, the national judiciary validates it, then a international entity contests it through an secretive arbitration panel, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK levied against him after the Russian aggression. He has filed a claim against a small nation for this reason, seeking a colossal sum: an amount representing half government’s annual revenue. Among the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Mounting Risks

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this issue described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about these lawsuits. Predictions that “when companies start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That warning has come to pass. In the current period, oil and gas and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which energy giants have obtained eighty-four billion dollars. That represents the combined GDP