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

Can you perceive our political system operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that was how it once functioned. No longer.

The Emergence of Offshore Arbitration Panels

In the modern era, overseas companies, or the wealthy individuals behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. You or I cannot take a case to them, nor can our government, including businesses based in this country. The door is open exclusively to businesses registered abroad.

If a tribunal determines that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These sums represent not tangible damages but funds the panel members conclude the company might otherwise have made. The administration could be forced to abandon its policy. It will be hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and investment funds fund legal actions in return for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are becoming prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can override domestic law and the rulings taken by parliaments is that this clause has been incorporated – absent public approval, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Specific Case: The Cumbrian Coalmine

A year ago, activists secured a significant win at the high court. The presiding officer found that plans to open the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The Labour government subsequently revoked the consent the Tories had granted. Today, this legal outcome could be compromised by an foreign court reporting to no one but the entities bringing the case.

Last August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in the United States was convened to consider the case.

This firm is suing the UK for the profits it might have made if the mine had been permitted to go ahead. Citizens have no idea how much this sum represents. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the domestic court validates it, then a foreign company challenges it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coal mine dispute was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to contest the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Escalating Risks

The public was told that such things wouldn’t happen. Years ago, a senior politician, championing the most significant and hazardous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this issue labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction is now a reality. This year, energy and resource corporations have lodged a record number of suits against nations both wealthy and developing, opposing – like the example of the Whitehaven project – state efforts to halt global warming. Corporations have to date won $114bn by using ISDS, of which oil majors have secured $84bn. That represents the combined GDP