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

How do you reckon our political system operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills become law. The law are enforced by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals staffed by commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, just as our government, or even businesses operating from this country. They are open only to businesses operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, even billions.

These awards are based not on real financial harm but money the tribunal officials conclude the company would perhaps have made. The administration could be forced to abandon its policy. It becomes hesitant to introducing similar legislation in that area, worried about being sued.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as firms learn from each other, and private equity fund legal actions for a share of a share of the takings. The outcome? Sovereignty and popular rule are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the choices enacted by parliaments is that this provision has been incorporated – absent public approval, and typically amid conditions of profound opacity – within international trade agreements.

A Concrete Example: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the high court. The justice found that schemes to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on climate commitments. The incoming administration then withdrew the permission the Tories had approved. Now, this success is under threat by an offshore tribunal accountable to exclusively the companies filing the suit.

During August, a company whose ultimate owners reside in the Cayman Islands lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was established to hear it.

The claimant is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. We have little idea how much this could amount to. Who is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the high court supports it, then a overseas corporation contests it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him after the war in Ukraine. He has filed a claim against another European state with similar intent, seeking $16bn: equivalent to half of government’s annual revenue. Part of the legal team on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its financial support package arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, secretive influence over elected governments could be blocking the money Ukraine urgently requires.

Empty Promises and Escalating Threats

Politicians promised that such things were not possible. Previously, a government leader, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An adviser on this matter accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with scepticism.

That prediction has now materialised. Recently, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, opposing – similar to the Cumbrian coalmine – state efforts to prevent climate breakdown. Companies have thus far won $114bn through ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP