Hello, International Tycoons and Firms! Kindly Proceed and Litigate Against the UK for Vast Sums.

Can you reckon our political system operates? It could be something like this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. Well, that was how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

Today, foreign corporations, and the billionaires behind them, have the power to sue elected administrations for the laws they pass, at private courts staffed by business advocates. The cases are held away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. Access is granted only to corporations based overseas.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but funds the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It is deterred from introducing similar legislation along the same lines, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as firms learn from each other, and private equity finance suits in return for a portion of the takings. The consequence? National sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to override a country's own laws and the decisions enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the senior court. The justice ruled that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration then withdrew the permission the previous administration had issued. Now, this victory faces being overturned by an secret arbitration panel answering to exclusively the entities petitioning it.

During August, a company whose ultimate owners are based in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's yearly income. Among the counsel on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s hesitation in using frozen oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

False Assurances and Growing Risks

We were assured that such things were not possible. In 2014, a former prime minister, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this issue described campaigners of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the poorer states to the developed economies” were met with general mockery.

That threat has now materialised. This year, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Firms have so far won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP