Welcome, Foreign Tycoons and Companies! Kindly Proceed and Take Legal Action Against the UK for Vast Sums.

How do you perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. However, that’s how it once functioned. No longer.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, and the billionaires behind them, are able to litigate against governments for the laws they pass, at offshore tribunals composed of commercial attorneys. These proceedings are conducted away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted exclusively to entities based overseas.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, running into billions.

These awards are based not on real financial harm but compensation the panel members determine the company would perhaps have made. The state might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of cases are being initiated, as corporations take cues from each other, and private equity fund legal actions in return for a share of the awards. The consequence? Sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings enacted by parliaments is that this clause has been incorporated – absent public approval, and often in a climate of total confidentiality – into trade treaties.

A Concrete Instance: The UK Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The justice found that plans to open the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the licence the Tories had granted. Today, this victory is under threat by an secret arbitration panel reporting to exclusively the corporations petitioning it.

Last August, a firm whose final controllers are located in the tax haven initiated proceedings against the UK government. The previous week a tribunal in Washington DC 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 could amount to. What legal team is acting on its behalf against the British government? A sitting MP, and former attorney-general in the previous government, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows little of the case at present, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, seeking a colossal sum: half that state's yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts argue that the EU’s delay in using frozen state funds as collateral for its financial support package is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that these scenarios could not occur. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and we have never seen a issue in the past.” An adviser on this issue labelled campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear these lawsuits. Warnings that “when companies begin to understand the power they now possess, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That prediction has come to pass. In the current period, fossil fuel and resource corporations have initiated a historic level of suits against nations both wealthy and developing, challenging – similar to the UK mine – official measures to prevent climate breakdown. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP