Welcome, Foreign Tycoons and Companies! Please Come and Take Legal Action Against the UK for Billions.

Can you perceive our democratic process works? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

Nowadays, foreign corporations, or the billionaires that control them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted in secret. Unlike our courts, these panels grant no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even businesses based in this country. Access is granted solely for corporations registered abroad.

When a secret court rules that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the arbitrators determine the company could potentially have made. The administration could be forced to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, worried about being sued.

A System Running Rampant

Historically high figures of legal actions are being initiated, as companies take cues from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings taken by elected bodies is that this stipulation has been written – without public consent, and often in conditions of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The judge found that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on national carbon targets. The Labour government subsequently revoked the licence the previous administration had approved. Today, this victory is under threat by an foreign court accountable to exclusively the entities filing the suit.

During August, a firm whose final controllers are located in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in the US capital was convened to consider the case.

This firm is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no idea how much this sum represents. What legal team is acting on its behalf in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company challenges it through an unaccountable private court, and a member of our parliament represents its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was appointed, 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 little of the case at present, but it seems likely that he will utilise the ISDS mechanism to challenge the restrictions the UK levied against him after the invasion of Ukraine. He has already started suing a small nation on these grounds, seeking $16bn: half that nation's annual revenue. Among the counsel representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars believe that the EU’s delay in using frozen Russian assets as collateral for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over elected governments could be blocking the finance Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that such things wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” A consultant on this issue labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “as corporations grasp the authority they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, fossil fuel and extraction companies have initiated a historic level of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Firms have to date won $114bn via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP