Welcome, Overseas Magnates and Corporations! Please Proceed and Sue the UK for Billions of Pounds.

Can you understand our political system works? It could be along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Well, that was how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

In the modern era, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of business advocates. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. They are open only to entities registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s anticipated profits, it may order damages of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but funds the tribunal officials determine the company would perhaps have made. The administration might be compelled to abandon its policy. It will be hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of cases are being filed, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings made by legislatures is that this clause has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – inside international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer determined that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had agreed to the questionable argument that the mine could have no impact on national carbon targets. The Labour government subsequently revoked the licence the Tories had issued. Now, this success faces being overturned by an foreign court accountable to only the corporations filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. The public has no clear indication how much this might be. Which individual is representing it against the British government? An elected representative, and former attorney-general in the Conservative government, that great patriot the MP. The state enacts a policy, the domestic court validates it, then a international entity challenges it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Case

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case to date, but it is highly possible that he will utilise the tribunal to challenge the sanctions the UK imposed on him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, seeking $16bn: an amount representing half government’s yearly income. Part of the legal team representing him there? Cherie Blair, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package is due to Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This extraordinary, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that such things were not possible. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal upon trade deal and we have never seen a issue in the past.” A consultant on this issue described critics of “alarmism … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies start to realise the influence they’ve been granted, they will shift their focus from the poorer states to the wealthy nations” were dismissed with scepticism.

That warning has come to pass. In the current period, fossil fuel and mining firms have initiated a unprecedented number of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Companies have so far won vast sums through ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP