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

Can you reckon our system of government functions? Perhaps along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, foreign corporations, and the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are held away from public scrutiny. Unlike our courts, these tribunals allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, including companies based in this country. Access is granted exclusively to corporations registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it may order financial penalties of vast sums, running into billions.

This compensation are based not on actual losses but funds the arbitrators decide the company might otherwise have made. The administration may have to drop the legislation. It is deterred from passing future laws of a similar nature, for fear of being sued.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies observe each other, and private equity finance suits for a share of a portion of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the choices enacted by legislatures is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Real-World Example: The UK Coal Mine

Last year, activists won a great victory at the senior court. The judge ruled that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on climate commitments. The new government later cancelled the consent the previous administration had approved. Now, this legal outcome is under threat by an offshore tribunal answering to only the corporations petitioning it.

During August, a company whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. Recently a tribunal in the United States was convened to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to go ahead. Citizens have little idea how much this sum represents. Who is serving as its counsel in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company challenges it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the court 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 billionaire, an oligarch. Details are scarce of the case so far, but it is highly possible that he will utilise the tribunal to fight the restrictions the UK levied against him following the invasion of Ukraine. He has already started suing Luxembourg for this reason, seeking a colossal sum: equivalent to half of state's yearly income. Included in the legal team on his side? Cherie Blair, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

Empty Promises and Growing Risks

We were assured that these events were not possible. Years ago, a former prime minister, promoting the biggest and most dangerous of all such treaties, declared: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by such legal actions. Warnings that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with general mockery.

That threat has come to pass. In the current period, oil and gas and extraction companies have lodged a record number of cases against nations across the economic spectrum, contesting – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That equates to the combined GDP