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Can you reckon our democratic process works? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is obtained, the bills pass into law. The law is upheld by the courts. End of story. Well, that used to be how it used to work. Those days are over.

The Rise of Offshore Courts

Nowadays, foreign corporations, or the billionaires who own them, can sue nation states for the regulations they pass, at private courts composed of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for businesses based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s projected profits, it can award damages of vast sums, potentially billions.

These sums are based not on actual losses but compensation the tribunal officials decide the company could potentially have made. The state might be compelled to abandon its policy. It is deterred from passing future laws along the same lines, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations take cues from each other, and investment funds bankroll lawsuits for a share of a cut of the settlements. The result? National sovereignty and democracy are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the decisions taken by parliaments is that this provision has been inserted – without public consent, and often in a climate of profound opacity – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that proposals to dig the first deep coalmine in the UK for 30 years, in northwest England, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have no impact on climate commitments. The new government later cancelled the consent the Tories had issued. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to only the corporations filing the suit.

Last August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in the United States was established to consider the case.

This firm is litigating against the UK for the revenue it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is serving as its counsel in opposition to the British government? A member of parliament, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a overseas corporation disputes it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK imposed on him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half government’s annual revenue. Part of the lawyers on his side? a prominent lawyer, married to the ex-UK leader.

Trade specialists believe that the EU’s delay in using frozen Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Escalating Costs

The public was told that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the biggest and most dangerous of all such treaties, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this issue labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that exclusively weaker states needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning is now a reality. This year, oil and gas and resource corporations have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – similar to the UK mine – state efforts to halt climate breakdown. Companies have thus far won vast sums via ISDS, of which energy giants have secured $84bn. That is equivalent to the combined GDP