Hello, International Magnates and Companies! Please Come and Litigate Against the UK for Vast Sums.

How do you understand our political system functions? Maybe something like this. The public votes for MPs. They legislate on bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. That's it. Yet, that was how it once functioned. No longer.

The Rise of Offshore Tribunals

In the modern era, foreign corporations, and the wealthy individuals that control them, can sue nation states for the regulations they pass, at offshore tribunals made up of commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these bodies grant no right of appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even businesses headquartered in this country. They are open exclusively to entities operating from foreign soil.

When a secret court determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums represent not tangible damages but compensation the arbitrators determine the company might otherwise have made. The government might be compelled to abandon its policy. It becomes discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as corporations take cues from each other, and investment funds finance suits for a share of a portion of the takings. The outcome? National sovereignty and democracy are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it can override national legislation and the rulings taken by legislatures is that this clause has been written – without public consent, and frequently under a climate of profound opacity – inside international trade agreements.

A Concrete Instance: The UK Coalmine

Last year, a conservation group won a great victory at the high court. The judge found that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine could have no consequence on our carbon budgets. The incoming administration subsequently revoked the licence the previous administration had granted. Currently, this success could be compromised by an offshore tribunal answering to no one but the corporations filing the suit.

Last August, a corporate entity whose final controllers are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Which individual is representing it challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the high court validates it, then a foreign company challenges it through an secretive offshore tribunal, and a elected official represents its behalf.

An Oligarch's Case

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it appears probable that he will utilise the arbitration process to fight the penalties the UK enacted against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: half that government’s annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s procrastination in using frozen state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that these events could not occur. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal upon trade deal and there has not been a problem in the past.” An expert on this matter accused critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will turn their attention from the poorer states to the strong ones” were met with scepticism.

That warning is now a reality. This year, energy and resource corporations have lodged a historic level of cases against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to stop climate breakdown. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP