Hello, Overseas Magnates and Companies! Please Proceed and Litigate Against the UK for Vast Sums.

How do you understand our political system works? It could be along the lines of this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Emergence of Offshore Tribunals

Nowadays, international firms, and the oligarchs who own them, have the power to sue governments for the regulations they pass, at offshore tribunals made up of business advocates. Such disputes are held away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or judicial review. The general public cannot take a case to them, just as our government, including enterprises headquartered in this country. They are open only to businesses registered abroad.

If a tribunal rules that a legislative action could harm the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.

These awards are based not on real financial harm but money the tribunal officials determine the company could potentially have made. The government might be compelled to drop the legislation. It is discouraged from enacting future policies in that area, due to the risk of facing litigation.

A System Running Rampant

Unprecedented levels of legal actions are being filed, as companies take cues from each other, and hedge funds finance suits for a share of a portion of the awards. The result? National sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – into trade treaties.

A Specific Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The presiding officer determined 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 previous government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The Labour government later cancelled the permission the Tories had granted. Today, this victory could be compromised by an foreign court reporting to no one but the corporations bringing the case.

During August, a corporate entity whose final controllers are based in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in Washington DC was established to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Who is representing it challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the national judiciary upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

The Russian Lawsuit

Concurrently that the court on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows scarce of the case at present, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, demanding a colossal sum: an amount representing half state's yearly income. Part of the legal team acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as security for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over democratic administrations might be preventing the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that such things wouldn’t happen. Years ago, a senior politician, championing the biggest and most dangerous of all such treaties, stated: “The UK has signed investment treaty after trade deal and there has never been a case in the past.” An expert on this issue accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Predictions that “when companies start to realise the power bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That threat is now a reality. In the current period, energy and extraction companies have lodged a historic level of suits against nations across the economic spectrum, opposing – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have secured the majority. That equates to the combined GDP