Greetings, Overseas Magnates and Corporations! Please Proceed and Sue the UK for Vast Sums.

How do you reckon our system of government operates? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. End of story. However, that was how it used to work. Not anymore.

The Advent of Offshore Courts

Nowadays, international firms, along with the wealthy individuals behind them, can sue governments for the regulations they pass, at offshore tribunals staffed by corporate lawyers. These proceedings are held behind closed doors. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. They are open solely for businesses based overseas.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These sums represent not actual losses but money the panel members conclude the company might otherwise have made. The government could be forced to rescind the measure. It will be hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being initiated, as firms take cues from each other, and private equity finance suits in return for a portion of the takings. The consequence? Democratic sovereignty and popular rule are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the rulings taken by elected bodies is that this provision has been written – absent public approval, and often in a climate of extreme secrecy – within trade treaties.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice found that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The Labour government then withdrew the consent the previous administration had approved. Currently, this victory faces being overturned by an secret arbitration panel accountable to no one but the entities filing the suit.

In August, a company whose ultimate owners are based in the offshore financial centre filed a lawsuit challenging the UK government. The previous week a dispute settlement body in the US capital was set up to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been permitted to proceed. We have little idea how much this could amount to. Who is representing it against the state? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the high court validates it, then a international entity contests it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coal mine dispute was established, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it seems likely that he may employ the arbitration process to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has filed a claim against Luxembourg with similar intent, claiming a colossal sum: equivalent to half of nation's annual revenue. Among the legal team on his side? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations might be preventing the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

We were assured that such things were not possible. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, declared: “The UK has signed trade agreement after trade deal and we have never seen a case in the past.” A consultant on this topic described activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by scepticism.

That warning has now materialised. This year, fossil fuel and resource corporations have lodged a record number of suits against nations across the economic spectrum, contesting – as in the case of the Whitehaven project – state efforts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP