Welcome, Foreign Tycoons and Corporations! Please Come and Take Legal Action Against the UK for Billions of Pounds.

How do you understand our democratic process works? Maybe something like this. The public votes for MPs. They legislate on bills. When a majority is obtained, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that was how it once functioned. Those days are over.

The Emergence of Shadow Arbitration Panels

Today, international firms, along with the wealthy individuals who own them, can sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, including companies based in this country. The door is open solely for corporations based overseas.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, even billions.

These awards represent not actual losses but money the panel members determine the company might otherwise have made. The administration might be compelled to rescind the measure. It is deterred from introducing similar legislation in that area, worried about being sued.

A Process Running Rampant

Record numbers of cases are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in exchange for a portion of the takings. The outcome? National sovereignty and democratic governance are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings made by elected bodies is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of profound opacity – inside trade treaties.

A Specific Case: The UK Coalmine

A year ago, environmental campaigners secured a significant win at the senior court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on national carbon targets. The Labour government then withdrew the consent the previous administration had granted. Currently, this success faces being overturned by an secret arbitration panel accountable to no one but the companies petitioning it.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was convened to adjudicate on it.

The company is seeking compensation from the UK for the money it would have generated if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. Which individual is serving as its counsel in opposition to the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the Russian aggression. He has previously filed a claim against another European state with similar intent, claiming a colossal sum: an amount representing half nation's annual revenue. Among the lawyers on his side? Cherie Blair, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen state funds as guarantee for its financial support package is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms start to realise the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with general mockery.

That prediction has now materialised. This year, fossil fuel and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to stop climate breakdown. Corporations have so far won $114bn via ISDS, of which energy giants have obtained $84bn. That equates to the combined GDP