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

Can you reckon our democratic process works? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, or the billionaires who own them, can sue elected administrations for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases take place away from public scrutiny. In contrast to domestic courts, these tribunals grant no right of appeal or legal review. You or I cannot take a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for entities operating from foreign soil.

If a tribunal determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but money the tribunal officials decide the company might otherwise have made. The state might be compelled to rescind the measure. It is discouraged from enacting future policies of a similar nature, for fear of facing litigation.

A System Running Rampant

Unprecedented levels of cases are being brought, as firms learn from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the decisions taken by elected bodies is that this provision has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Concrete Instance: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The presiding officer ruled that proposals to open the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Now, this success faces being overturned by an secret arbitration panel reporting to only the corporations petitioning it.

Last August, a firm whose beneficial owners are based in the Cayman Islands filed a lawsuit against the UK government. The previous week a arbitration panel in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. The public has no idea how much this might be. What legal team is acting on its behalf against the state? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The state makes a decision, the national judiciary upholds it, then a foreign company challenges it through an unaccountable private court, and a elected official acts on its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was appointed, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it is highly possible that he may employ the tribunal to contest the sanctions the UK imposed on him subsequent to the war in Ukraine. He has previously started suing another European state for this reason, seeking $16bn: equivalent to half of government’s annual revenue. Part of the counsel on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these events could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies grasp the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were dismissed with scepticism.

That prediction has now materialised. Recently, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Firms have to date won $114bn via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP