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

How do you understand our system of government works? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Yet, that’s how it operated in the past. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, international firms, along with the billionaires behind them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. The cases are conducted behind closed doors. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even companies based in this country. They are open solely for corporations based overseas.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums constitute not real financial harm but money the tribunal officials determine the company could potentially have made. The administration might be compelled to rescind the measure. It becomes deterred from introducing similar legislation in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as firms take cues from each other, and private equity finance suits in return for a cut of the awards. The result? Sovereignty and democratic governance are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions taken by elected bodies is that this provision has been incorporated – absent public approval, and often in a climate of extreme secrecy – within international trade agreements.

A Specific Example: The Whitehaven Coalmine

Last year, activists won a great victory at the senior court. The presiding officer found that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration later cancelled the licence the previous administration had issued. Currently, this success faces being overturned by an secret arbitration panel answering to exclusively the entities bringing the case.

In August, a corporate entity whose ultimate owners reside in the Cayman Islands initiated proceedings against the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have no idea how much this might be. Which individual is acting on its behalf against the state? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The government makes a decision, the high court upholds it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

On the same day that the court on the coalmine case was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him following the war in Ukraine. He has previously initiated proceedings against a small nation with similar intent, demanding sixteen billion dollars: half that state's yearly income. Among the legal team on his side? a prominent lawyer, wife of the former British prime minister.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states could be blocking the money Ukraine urgently requires.

Misleading Claims and Escalating Threats

The public was told that these events could not occur. Previously, a government leader, advocating for the most significant and hazardous of all such treaties, stated: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” A consultant on this topic described activists of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about such legal actions. Predictions that “when companies grasp the authority bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning is now a reality. In the current period, fossil fuel and extraction companies have lodged a unprecedented number of cases against nations rich and poor, challenging – as in the case of the UK mine – official measures to prevent environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which oil majors have been awarded the majority. That represents the combined GDP