Welcome, Overseas Magnates and Companies! Please Come and Take Legal Action Against the UK for Vast Sums.

Can you reckon our democratic process works? It could be similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

Today, foreign corporations, along with the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. Such disputes take place in secret. Differing from national judiciaries, these panels allow no right of appeal or judicial review. You or I are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open exclusively to businesses based overseas.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it can award financial penalties of vast sums, even billions.

These sums represent not actual losses but money the arbitrators conclude the company could potentially have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies along the same lines, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being brought, as firms observe each other, and investment funds bankroll lawsuits in return for a portion of the takings. The outcome? National sovereignty and democratic governance are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices taken by elected bodies is that this provision has been written – without public consent, and often in an atmosphere of total confidentiality – inside trade treaties.

A Concrete Example: The Whitehaven Coal Mine

A year ago, activists won a great victory at the senior court. The presiding officer determined that schemes to open the first deep coalmine in the UK for 30 years, in Cumbria, had been unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The incoming administration then withdrew the licence the previous administration had issued. Today, this legal outcome faces being overturned by an secret arbitration panel reporting to exclusively the companies bringing the case.

During August, a company whose final controllers are based in the tax haven initiated proceedings against the UK government. Recently a tribunal in Washington DC was convened to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had received permission to commence operations. The public has little idea how much this could amount to. Who is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state passes a law, the high court validates it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to contest the sanctions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg for this reason, claiming $16bn: equivalent to half of state's annual revenue. Part of the counsel representing him there? Cherie Blair, wife of the ex-UK leader.

Legal experts argue that the EU’s hesitation in utilising seized state funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over democratic administrations might be preventing the funds Ukraine urgently requires.

Empty Promises and Mounting Costs

We were assured that these scenarios wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all investment pacts, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” A consultant on this matter accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That warning has now materialised. This year, oil and gas and resource corporations have filed a record number of cases against nations rich and poor, opposing – like the example of the Whitehaven project – official measures to halt climate breakdown. Companies have thus far won $114bn through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP