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

What is your understand our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Advent of Secret Arbitration Panels

Nowadays, foreign corporations, along with the oligarchs who own them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of business advocates. These proceedings are held behind closed doors. Differing from national judiciaries, these bodies allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, including companies headquartered in this country. They are open solely for corporations based overseas.

Should an arbitration panel determines that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, even billions.

These sums are based not on tangible damages but funds the tribunal officials determine the company might otherwise have made. The administration may have to drop the legislation. It will be discouraged from enacting future policies of a similar nature, worried about being sued.

A Process Spiralling Out of Control

Historically high figures of disputes are being brought, as corporations learn from each other, and private equity fund legal actions for a share of a portion of the awards. The outcome? National sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can override national legislation and the decisions enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid conditions of total confidentiality – inside international trade agreements.

A Concrete Example: The UK Coalmine

Twelve months ago, activists secured a significant win at the High Court. The justice ruled that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government then withdrew the permission the former government had approved. Now, this legal outcome could be compromised by an secret arbitration panel reporting to exclusively the corporations filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Recently a dispute settlement body in Washington DC was convened to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this could amount to. Which individual is representing it challenging the state? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation contests it through an secretive private court, and a sitting MP acts on its behalf.

A Sanctions Case

Concurrently that the court on the coalmine case was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know scarce of the case to date, but it appears probable that he may employ the arbitration process to contest the penalties the UK enacted against him following the invasion of Ukraine. He has previously filed a claim against a small nation with similar intent, seeking sixteen billion dollars: half that government’s annual revenue. Among the counsel representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Risks

The public was told that these events wouldn’t happen. In 2014, a former prime minister, advocating for the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear ISDS claims. Warnings that “once firms begin to understand the power they now possess, they will redirect their efforts from the poorer states to the strong ones” were dismissed with scepticism.

That prediction has now materialised. This year, oil and gas and extraction companies have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – government attempts to stop climate breakdown. Companies have thus far won vast sums through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP