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

Can you understand our political system functions? Maybe along the lines of this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. End of story. Well, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Arbitration Panels

In the modern era, international firms, along with the oligarchs behind them, can sue elected administrations for the laws they pass, at offshore tribunals composed of business advocates. Such disputes are held behind closed doors. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. The general public are barred from bringing a case to them, nor can our government, including enterprises operating from this country. The door is open only to corporations based overseas.

If a tribunal determines that a government measure could harm the corporation’s anticipated profits, it can award damages of hundreds of millions, potentially billions.

This compensation are based not on actual losses but compensation the tribunal officials decide the company might otherwise have made. The state may have to rescind the measure. It will be discouraged from enacting future policies in that area, worried about facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms observe each other, and hedge funds finance suits in exchange for a portion of the awards. The outcome? Democratic sovereignty and democracy are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede a country's own laws and the decisions enacted by elected bodies is that this stipulation has been written – without democratic mandate, and often in conditions of profound opacity – into bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice determined that proposals to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The new government subsequently revoked the permission the previous administration had granted. Now, this victory faces being overturned by an secret arbitration panel accountable to only the entities bringing the case.

Last August, a firm whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was convened to adjudicate on it.

The company is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. Citizens have no idea how much this sum represents. Which individual is representing it challenging the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a foreign company disputes it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case to date, but it is highly possible that he will utilise the tribunal to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing another European state on these grounds, seeking a colossal sum: an amount representing half state's yearly budget. Included in the legal team representing him there? a prominent lawyer, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized oligarchs' funds as collateral for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that these events could not occur. Previously, a former prime minister, championing the most significant and hazardous of all these agreements, stated: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” An adviser on this topic described activists of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about ISDS claims. Warnings that “when companies grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That prediction is now a reality. This year, oil and gas and extraction companies have initiated a unprecedented number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Companies have to date won $114bn through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP