Greetings, Overseas Magnates and Corporations! Please Proceed and Take Legal Action Against the UK for Billions of Pounds.

How do you perceive our system of government works? It could be something like this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that used to be how it used to work. Those days are over.

The Rise of Offshore Courts

Nowadays, foreign corporations, along with the oligarchs who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even companies based in this country. Access is granted exclusively to entities registered abroad.

If a tribunal finds that a government measure could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but money the panel members decide the company could potentially have made. The state might be compelled to drop the legislation. It will be discouraged from enacting future policies in that area, for fear of incurring a lawsuit.

A Process Running Rampant

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and investment funds fund legal actions in return for a cut of the awards. The outcome? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings enacted by parliaments is that this clause has been inserted – absent public approval, and typically amid a climate of extreme secrecy – into trade treaties.

A Concrete Example: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the senior court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration then withdrew the permission the former government had granted. Today, this success is under threat by an foreign court answering to no one but the companies filing the suit.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre initiated proceedings challenging the UK government. The previous week a tribunal in Washington DC was established to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to go ahead. We have no idea how much this might be. What legal team is serving as its counsel against the British government? A sitting MP, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation challenges it through an undemocratic private court, and a elected official represents its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. Details are little of the case so far, but it is highly possible that he may employ the arbitration process to contest the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has filed a claim against a small nation for this reason, claiming a colossal sum: half that state's annual revenue. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as security for its loan to Ukraine stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

The public was told that such things could not occur. Previously, a former prime minister, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this issue described campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations grasp the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and extraction companies have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – government attempts to halt global warming. Companies have thus far won vast sums by using ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP