Welcome, Overseas Tycoons and Firms! Please Come and Litigate Against the UK for Billions.

How do you reckon our political system operates? Maybe along the lines of this. We elect MPs. They vote on bills. When a majority is secured, the bills become law. Statutes are enforced by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, along with the wealthy individuals behind them, can sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings are conducted behind closed doors. In contrast to domestic courts, these tribunals provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises headquartered in this country. Access is granted exclusively to businesses based overseas.

When a secret court rules that a government measure might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

This compensation constitute not tangible damages but compensation the arbitrators decide the company would perhaps have made. The administration may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Process Running Rampant

Record numbers of disputes are being brought, as companies take cues from each other, and investment funds fund legal actions for a share of a cut of the awards. The outcome? Sovereignty and popular rule are turning into prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings enacted by legislatures is that this provision has been written – absent public approval, and often in a climate of total confidentiality – within international trade agreements.

A Real-World Instance: The UK Coalmine

Last year, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to excavate the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted 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 subsequently revoked the permission the previous administration had approved. Currently, this victory is under threat by an foreign court accountable to only the entities bringing the case.

In August, a company whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had received permission to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a international entity challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know scarce of the case at present, but it is highly possible that he’ll use the arbitration process to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already started suing another European state for this reason, seeking $16bn: an amount representing half nation's yearly budget. Among the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized state funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine desperately needs.

Misleading Claims and Growing Threats

We were assured that such things wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, stated: “The UK has signed trade agreement upon trade deal and there has not been a issue in the past.” An adviser on this issue labelled campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “once firms grasp the authority they now possess, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That threat is now a reality. Recently, energy and extraction companies have filed a historic level of cases against nations both wealthy and developing, opposing – similar to the UK mine – official measures to halt climate breakdown. Corporations have thus far won vast sums through ISDS, of which oil majors have secured $84bn. That is equivalent to the combined GDP