Hello, Foreign Magnates and Corporations! Kindly Come and Litigate Against the UK for Billions of Pounds.

Can you perceive our democratic process operates? Maybe similar to this. We elect MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Rise of Secret Tribunals

In the modern era, overseas companies, or the billionaires who own them, have the power to sue nation states for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held behind closed doors. Differing from national judiciaries, these panels allow no right of appeal or legal review. The general public are unable to file a case to them, just as our government, or even enterprises headquartered in this country. They are open only to businesses registered abroad.

When a secret court finds that a law or policy might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, potentially billions.

This compensation constitute not actual losses but money the arbitrators conclude the company might otherwise have made. The administration may have to abandon its policy. It is deterred from passing future laws along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Record numbers of cases are being filed, as companies observe each other, and private equity fund legal actions for a share of a cut of the takings. The result? Sovereignty and democracy are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings taken by parliaments is that this provision has been inserted – absent public approval, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer ruled that schemes to excavate the first new deep coal mine in the UK for 30 years, in northwest England, had been unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government then withdrew the consent the Tories had approved. Currently, this success faces being overturned by an foreign court reporting to only the corporations filing the suit.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was convened to hear it.

This firm is suing the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this sum represents. Which individual is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity disputes it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

Simultaneously that the panel on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. The public knows little of the case so far, but it is highly possible that he’ll use the arbitration process to fight the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, seeking $16bn: an amount representing half nation's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

Empty Promises and Growing Threats

The public was told that these scenarios were not possible. In 2014, a government leader, promoting the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a problem in the past.” An adviser on this topic described critics of “alarmism … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That prediction has now materialised. In the current period, fossil fuel and extraction companies have lodged a historic level of suits against nations rich and poor, challenging – like the example of the Whitehaven project – official measures to stop global warming. Firms have so far won $114bn by using ISDS, of which oil majors have secured the majority. That represents the combined GDP