Greetings, Overseas Magnates and Companies! Kindly Come and Litigate Against the UK for Vast Sums.

Can you understand our political system operates? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that was how it once functioned. Those days are over.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, along with the billionaires behind them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of corporate lawyers. Such disputes take place in secret. In contrast to domestic courts, these tribunals allow no right of appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies operating from this country. The door is open exclusively to businesses operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

This compensation constitute not tangible damages but money the arbitrators determine the company would perhaps have made. The state could be forced to rescind the measure. It will be discouraged from passing future laws in that area, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of cases are being brought, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The result? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices made by elected bodies is that this stipulation has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – into international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, activists achieved a major legal triumph at the high court. The judge found that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on national carbon targets. The new government subsequently revoked the permission the Tories had granted. Today, this legal outcome could be compromised by an foreign court reporting to exclusively the entities filing the suit.

Last August, a firm whose final controllers are based in the tax haven filed a lawsuit against the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to commence operations. The public has little idea how much this sum represents. Who is representing it in opposition to the state? A sitting MP, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him following the war in Ukraine. He has filed a claim against another European state for this reason, seeking a colossal sum: half that nation's yearly budget. Among the lawyers acting for him in that case? Cherie Blair, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that such things could not occur. In 2014, a senior politician, promoting the most significant and hazardous of all these agreements, declared: “We’ve signed trade deal after trade deal and we have never seen a problem in the past.” A consultant on this topic described critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states needed to fear such legal actions. Warnings that “as corporations start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning is now a reality. This year, energy and extraction companies have lodged a historic level of suits against nations across the economic spectrum, contesting – as in the case of the UK mine – state efforts to prevent global warming. Firms have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP