Greetings, Overseas Tycoons and Firms! Please Come and Litigate Against the UK for Billions.

How do you reckon our system of government functions? It could be similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, along with the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at private courts composed of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even companies headquartered in this country. Access is granted only to corporations registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it can award compensation of hundreds of millions, even billions.

This compensation represent not actual losses but funds the tribunal officials determine the company would perhaps have made. The government might be compelled to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as companies observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and often in a climate of extreme secrecy – inside bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that schemes to excavate the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The Labour government later cancelled the licence the previous administration had granted. Now, this victory is under threat by an secret arbitration panel accountable to only the entities petitioning it.

During August, a firm whose ultimate owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a tribunal in Washington DC was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had received permission to go ahead. The public has little idea how much this could amount to. What legal team is representing it in opposition to the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case at present, but it seems likely that he may employ the arbitration process to challenge the penalties the UK imposed on him following the war in Ukraine. He has already initiated proceedings against another European state with similar intent, seeking sixteen billion dollars: half that nation's yearly budget. Part of the lawyers representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as collateral for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic labelled campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will redirect their efforts from the poorer states to the wealthy nations” were greeted by widespread derision.

That prediction is now a reality. In the current period, oil and gas and extraction companies have lodged a unprecedented number of suits against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to prevent environmental catastrophe. Firms have so far won $114bn through ISDS, of which energy giants have been awarded eighty-four billion dollars. That represents the combined GDP