Greetings, Foreign Magnates and Companies! Please Come and Take Legal Action Against the UK for Vast Sums.

How do you reckon our system of government operates? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that was how it used to work. No longer.

The Rise of Offshore Tribunals

Today, international firms, or the wealthy individuals who own them, can sue elected administrations for the regulations they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses based in this country. The door is open exclusively to corporations based overseas.

When a secret court finds that a legislative action could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the arbitrators determine the company might otherwise have made. The state could be forced to drop the legislation. It becomes deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being filed, as companies take cues from each other, and investment funds finance suits in exchange for a portion of the settlements. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede national legislation and the choices made by legislatures is that this clause has been inserted – absent public approval, and typically amid a climate of total confidentiality – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Last year, a conservation group secured a significant win at the high court. The justice determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the permission the Tories had granted. Currently, this success is under threat by an foreign court reporting to only the entities petitioning it.

During August, a corporate entity whose final controllers are located in the offshore financial centre initiated proceedings against the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The claimant is suing the UK for the money it might have made if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Which individual is representing it against the state? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity challenges it through an unaccountable arbitration panel, and a elected official acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case so far, but it seems likely that he may employ the arbitration process to contest the restrictions the UK levied against him subsequent to the war in Ukraine. He has filed a claim against Luxembourg for this reason, demanding a colossal sum: an amount representing half government’s annual revenue. Among the counsel acting for him in that case? a prominent lawyer, married to the ex-UK leader.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that these events wouldn’t happen. Previously, a senior politician, championing the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” An expert on this matter described campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries needed to fear these lawsuits. Warnings that “when companies start to realise the authority bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. In the current period, energy and mining firms have initiated a historic level of suits against nations across the economic spectrum, contesting – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP