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

What is your perceive our system of government works? Maybe something like this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, international firms, or the oligarchs who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are held behind closed doors. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

These sums constitute not tangible damages but compensation the tribunal officials determine the company could potentially have made. The administration may have to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies observe each other, and investment funds fund legal actions for a share of a cut of the awards. The result? Sovereignty and democratic governance are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices made by parliaments is that this provision has been incorporated – absent public approval, and typically amid conditions of total confidentiality – inside trade treaties.

A Real-World Case: The Whitehaven Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the licence the previous administration had granted. Currently, this success is under threat by an secret arbitration panel accountable to only the corporations bringing the case.

Last August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. We have no idea how much this could amount to. Who is serving as its counsel in opposition to the British government? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot the MP. The government passes a law, the national judiciary validates it, then a international entity contests it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coalmine case was established, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case to date, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against another European state on these grounds, claiming $16bn: half that nation's yearly budget. Included in the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Threats

Politicians promised that these events were not possible. Previously, a government leader, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An expert on this matter labelled activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “when companies begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That prediction is now a reality. This year, oil and gas and resource corporations have lodged a historic level of claims against nations across the economic spectrum, contesting – like the example of the UK mine – official measures to prevent environmental catastrophe. Companies have so far won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP