Hello, Overseas Tycoons and Companies! Please Come and Litigate Against the UK for Billions of Pounds.

Can you perceive our system of government operates? Perhaps similar to this. The public votes for MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Advent of Shadow Courts

In the modern era, international firms, and the wealthy individuals behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are held away from public scrutiny. Differing from national judiciaries, these tribunals provide 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 corporations registered abroad.

When a secret court finds that a legislative action may compromise the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These awards constitute not real financial harm but funds the tribunal officials decide the company could potentially have made. The administration could be forced to rescind the measure. It will be discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being brought, as companies learn from each other, and investment funds fund legal actions in exchange for a share of the settlements. The consequence? Democratic sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump national legislation and the rulings made by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in an atmosphere of profound opacity – within international trade agreements.

A Specific Example: The UK Coal Mine

Twelve months ago, activists won a great victory at the high court. The judge determined that plans to dig the first deep coalmine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government later cancelled the consent the previous administration had issued. Today, this victory is under threat by an offshore tribunal reporting to only the companies filing the suit.

In August, a corporate entity whose ultimate owners are located in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The company is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this sum represents. What legal team is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic arbitration panel, and a elected official acts on its behalf.

The Russian Challenge

Concurrently that the tribunal on the mining lawsuit was convened, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it is highly possible that he may employ the tribunal to challenge the sanctions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation with similar intent, claiming a colossal sum: half that nation's annual revenue. Among the counsel acting for him in that case? a prominent lawyer, spouse of the ex-UK leader.

International law scholars contend that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these scenarios could not occur. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” An adviser on this issue accused activists of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That threat has come to pass. In the current period, fossil fuel and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, challenging – like the example of the UK mine – state efforts to stop climate breakdown. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP