Welcome, International Magnates and Companies! Kindly Proceed and Litigate Against the UK for Billions of Pounds.

Can you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is upheld by the courts. End of story. However, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

Nowadays, foreign corporations, or the wealthy individuals behind them, can sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. The cases are conducted in secret. In contrast to domestic courts, these bodies provide no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, including businesses headquartered in this country. They are open solely for entities operating from foreign soil.

If a tribunal rules that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, running into billions.

This compensation represent not real financial harm but compensation the arbitrators determine the company might otherwise have made. The administration might be compelled to drop the legislation. It is hesitant to passing future laws along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of cases are being initiated, as companies observe each other, and investment funds finance suits in return for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings taken by parliaments is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Concrete Case: The Whitehaven Coal Mine

A year ago, a conservation group won a great victory at the high court. The justice ruled that plans to dig the first deep coalmine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the consent the former government had issued. Today, this legal outcome could be compromised by an secret arbitration panel accountable to no one but the companies bringing the case.

During August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit against the UK government. Recently a tribunal in the US capital was convened to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Which individual is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him after the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, demanding a colossal sum: half that state's yearly budget. Part of the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars contend that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, undemocratic power over sovereign states may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that such things wouldn’t happen. In 2014, a senior politician, advocating for the biggest and most dangerous of all investment pacts, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this issue described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about these lawsuits. Warnings that “as corporations start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction has come to pass. Recently, oil and gas and mining firms have lodged a record number of suits against nations both wealthy and developing, opposing – similar to the UK mine – government attempts to stop environmental catastrophe. Firms have so far won $114bn by using ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP