Hello, International Magnates and Firms! Please Come and Sue the UK for Billions.

How do you reckon our political system functions? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. End of story. Well, that’s how it operated in the past. Not anymore.

The Rise of Offshore Arbitration Panels

Today, overseas companies, or the wealthy individuals behind them, are able to litigate against nation states for the regulations they pass, at private courts staffed by corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these panels provide no right of appeal or legal review. The general public cannot take a case to them, just as our government, or even businesses based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel rules that a legislative action might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but money the tribunal officials determine the company could potentially have made. The state could be forced to rescind the measure. It is hesitant to passing future laws of a similar nature, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as companies learn from each other, and private equity fund legal actions in exchange for a cut of the awards. The outcome? National sovereignty and democracy are now unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices enacted by parliaments is that this provision has been inserted – without public consent, and frequently under an atmosphere of total confidentiality – inside bilateral investment treaties.

A Concrete Example: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice found that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the Conservative government, which had agreed to the extraordinary assertion that the mine would have zero effect on climate commitments. The incoming administration later cancelled the licence the Tories had granted. Today, this legal outcome faces being overturned by an foreign court answering to only the entities petitioning it.

During August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings versus the UK government. Recently a arbitration panel in the US capital was convened to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this could amount to. Who is serving as its counsel against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The government enacts a policy, the high court upholds it, then a foreign company challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Concurrently that the court on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are scarce of the case at present, but it appears probable that he may employ the arbitration process to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has previously started suing Luxembourg on these grounds, seeking sixteen billion dollars: equivalent to half of state's yearly income. Among the legal team on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen state funds as security for its aid for Ukraine arises from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over democratic administrations might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that these scenarios wouldn’t happen. Years ago, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “Britain has agreed to trade agreement after trade deal and there has never been a case in the past.” A consultant on this issue described campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “when companies grasp the authority they’ve been granted, they will shift their focus from the vulnerable countries to the developed economies” were met with general mockery.

That warning has come to pass. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the UK mine – official measures to stop environmental catastrophe. Corporations have so far won vast sums via ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP