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Can you perceive our democratic process works? Maybe similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that used to be how it once functioned. Not anymore.

The Advent of Offshore Courts

In the modern era, overseas companies, along with the wealthy individuals behind them, are able to litigate against governments for the laws they pass, at private courts composed of corporate lawyers. These proceedings are held in secret. Differing from national judiciaries, these tribunals allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even enterprises based in this country. Access is granted only to corporations based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, potentially billions.

These awards represent not tangible damages but money the tribunal officials determine the company could potentially have made. The government might be compelled to abandon its policy. It becomes discouraged from passing future laws of a similar nature, worried about being sued.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as firms learn from each other, and hedge funds fund legal actions in return for a share of the settlements. The result? National sovereignty and popular rule are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings enacted by elected bodies is that this provision has been inserted – without public consent, and typically amid conditions of total confidentiality – inside international trade agreements.

A Specific Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer found that schemes to dig the first major coal mine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have had no consequence on climate commitments. The new government later cancelled the licence the Tories had approved. Today, this success is under threat by an foreign court answering to no one but the entities petitioning it.

In August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was established to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have little idea how much this sum represents. Who is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the national judiciary supports it, then a foreign company disputes it through an unaccountable private court, and a elected official works for its behalf.

The Russian Challenge

On the same day that the panel on the coal mine dispute was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case at present, but it seems likely that he will utilise the tribunal to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, demanding a colossal sum: equivalent to half of nation's yearly income. Among the lawyers representing him there? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, undemocratic power over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that such things were not possible. Years ago, a former prime minister, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this matter accused activists of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about such legal actions. Predictions that “as corporations begin to understand the influence they’ve been granted, they will turn their attention from the vulnerable countries to the developed economies” were met with widespread derision.

That threat has come to pass. This year, fossil fuel and mining firms have lodged a unprecedented number of claims against nations rich and poor, challenging – similar to the UK mine – official measures to stop global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP