Hello, International Tycoons and Firms! Kindly Come and Litigate Against the UK for Billions of Pounds.

Can you reckon our political system functions? It could be something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, foreign corporations, along with the billionaires who own them, have the power to sue elected administrations for the laws they pass, at private courts composed of commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, including enterprises operating from this country. The door is open only to businesses registered abroad.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These sums represent not real financial harm but funds the panel members conclude the company could potentially have made. The government might be compelled to rescind the measure. It will be deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations take cues from each other, and private equity fund legal actions in exchange for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices enacted by elected bodies is that this clause has been written – without democratic mandate, and typically amid a climate of profound opacity – within trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, activists won a great victory at the High Court. The justice ruled that plans to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on national carbon targets. The Labour government later cancelled the licence the previous administration had approved. Currently, this legal outcome could be compromised by an foreign court accountable to exclusively the corporations petitioning it.

Last August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a tribunal in the United States was convened to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no clear indication how much this might be. Which individual is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state passes a law, the high court validates it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case to date, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has previously started suing a small nation on these grounds, seeking a colossal sum: equivalent to half of state's yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that these scenarios could not occur. In 2014, a government leader, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” An expert on this matter labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms begin to understand the power they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were met with scepticism.

That threat has now materialised. This year, oil and gas and extraction companies have filed a record number of suits against nations rich and poor, opposing – as in the case of the Whitehaven project – official measures to halt global warming. Firms have thus far won $114bn through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP