Greetings, Overseas Tycoons and Firms! Please Proceed and Sue the UK for Billions.

How do you understand our political system functions? Perhaps similar to this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills pass into law. The law is maintained by the courts. End of story. Yet, that used to be how it operated in the past. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or legal review. The general public are unable to file a case to them, nor can our government, including businesses based in this country. They are open exclusively to businesses based overseas.

Should an arbitration panel rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant compensation of vast sums, even billions.

This compensation constitute not actual losses but funds the panel members conclude the company might otherwise have made. The government may have to rescind the measure. It will be hesitant to passing future laws of a similar nature, worried about facing litigation.

A System Spiralling Out of Control

Record numbers of legal actions are being filed, as corporations learn from each other, and investment funds finance suits for a share of a cut of the settlements. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the choices made by parliaments is that this clause has been written – without public consent, and frequently under conditions of extreme secrecy – inside international trade agreements.

A Real-World Case: The Cumbrian Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, in northwest England, were found to be wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have no impact on climate commitments. The incoming administration later cancelled the consent the former government had approved. Currently, this victory is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit against the UK government. Recently a dispute settlement body in the United States was convened to consider the case.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot the MP. The administration makes a decision, the high court validates it, then a foreign company contests it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was convened, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case to date, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has already filed a claim against a small nation with similar intent, seeking sixteen billion dollars: an amount representing half state's annual revenue. Included in the counsel representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

Politicians promised that these events wouldn’t happen. Previously, a senior politician, advocating for the biggest and most dangerous of all these agreements, told us: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” A consultant on this topic accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries had to worry about such legal actions. Warnings that “when companies grasp the power they now possess, they will turn their attention from the weak nations to the developed economies” were dismissed with scepticism.

That threat has come to pass. In the current period, oil and gas and mining firms have initiated a historic level of suits against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Corporations have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained $84bn. That represents the combined GDP