Welcome, Overseas Magnates and Corporations! Please Come and Litigate Against the UK for Billions of Pounds.

Can you perceive our democratic process functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that was how it used to work. No longer.

The Advent of Shadow Tribunals

Today, international firms, and the billionaires that control them, can sue nation states for the policies they pass, at offshore tribunals made up of business advocates. These proceedings take place away from public scrutiny. Differing from national judiciaries, these panels provide no right of appeal or judicial review. The general public are barred from bringing a case to them, nor can our government, including companies headquartered in this country. The door is open solely for entities based overseas.

Should an arbitration panel determines that a legislative action may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These sums are based not on actual losses but funds the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It becomes deterred from passing future laws along the same lines, worried about being sued.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the awards. The consequence? National sovereignty and democracy are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the decisions taken by legislatures is that this clause has been incorporated – absent public approval, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Example: The UK Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the licence the previous administration had granted. Currently, this victory is under threat by an secret arbitration panel reporting to no one but the corporations bringing the case.

During August, a company whose ultimate owners reside in the offshore financial centre initiated proceedings versus the UK government. Last week a tribunal in the US capital was set up to adjudicate on it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. We have little idea how much this might be. What legal team is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration passes a law, the domestic court supports it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case so far, but it appears probable that he’ll use the tribunal to fight the restrictions the UK enacted against him subsequent to the war in Ukraine. He has already filed a claim against another European state on these grounds, demanding a colossal sum: half that state's annual revenue. Among the counsel on his side? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in leveraging immobilised state funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine urgently requires.

Empty Promises and Growing Risks

We were assured that such things could not occur. Previously, a government leader, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this matter described campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms begin to understand the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction has come to pass. Recently, oil and gas and resource corporations have lodged a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP