Welcome, Foreign Magnates and Companies! Please Proceed and Sue the UK for Vast Sums.

How do you reckon our system of government works? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Emergence of Offshore Tribunals

Today, foreign corporations, along with the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at private courts made up of business advocates. The cases take place in secret. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to entities based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, running into billions.

This compensation are based not on real financial harm but compensation the arbitrators determine the company would perhaps have made. The government might be compelled to abandon its policy. It is deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being filed, as firms take cues from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The outcome? Sovereignty and democratic governance are becoming unaffordable.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the rulings taken by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – within trade treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The presiding officer determined that proposals to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no consequence on climate commitments. The new government subsequently revoked the permission the previous administration had approved. Today, this victory faces being overturned by an foreign court answering to no one but the corporations petitioning it.

During August, a corporate entity whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

This firm is litigating against the UK for the money it would have generated if the mine had been permitted to proceed. The public has no idea how much this might be. Who is representing it against the British government? A member of parliament, and former attorney-general in the previous government, that great patriot the MP. The government makes a decision, the domestic court upholds it, then a foreign company contests it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case so far, but it appears probable that he may employ the tribunal to challenge the restrictions the UK enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg with similar intent, demanding $16bn: half that government’s yearly income. Among the lawyers on his side? a prominent lawyer, married to the previous PM.

Trade specialists believe that the EU’s procrastination in utilising seized Russian assets as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the finance Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that such things could not occur. Previously, a senior politician, championing the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” An expert on this topic labelled campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Warnings that “once firms grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the developed economies” were dismissed with scepticism.

That prediction has come to pass. This year, energy and mining firms have filed a record number of suits against nations both wealthy and developing, challenging – like the example of the Whitehaven project – official measures to halt climate breakdown. Firms have to date won $114bn through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP