Welcome, Overseas Tycoons and Companies! Please Proceed and Sue the UK for Vast Sums.

How do you perceive our system of government works? It could be similar to this. We elect MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. That's it. However, that was how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, along with the oligarchs who own them, can sue governments for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings are held in secret. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. The general public cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted solely for entities based overseas.

If a tribunal rules that a government measure could harm the corporation’s expected profits, it may order damages of hundreds of millions, even billions.

These sums constitute not real financial harm but compensation the panel members determine the company would perhaps have made. The state might be compelled to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of cases are being initiated, as firms take cues from each other, and hedge funds bankroll lawsuits in return for a cut of the takings. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the rulings taken by parliaments is that this provision has been incorporated – without public consent, and often in a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer determined that proposals to open the first new deep coal mine in the UK for 30 years, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have no impact on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Today, this legal outcome could be compromised by an offshore tribunal reporting to exclusively the corporations filing the suit.

Last August, a firm whose final controllers reside in the tax haven filed a lawsuit against the UK government. The previous week a dispute settlement body in the United States was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. Which individual is acting on its behalf challenging the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary validates it, then a overseas corporation disputes it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it is highly possible that he’ll use the tribunal to contest the restrictions the UK enacted against him after the war in Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding sixteen billion dollars: half that government’s yearly income. Part of the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Risks

Politicians promised that these events were not possible. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic described activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “when companies grasp the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. In the current period, fossil fuel and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded the majority. That equates to the combined GDP