Hello, Overseas Magnates and Companies! Please Proceed and Sue the UK for Billions of Pounds.

What is your reckon our political system functions? It could be along the lines of this. We elect MPs. They legislate on bills. When a majority is achieved, the bills become law. Legislation are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Offshore Arbitration Panels

Today, international firms, and the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at private courts made up of commercial attorneys. Such disputes are held in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including enterprises operating from this country. They are open only to entities registered abroad.

When a secret court rules that a government measure could harm the corporation’s projected profits, it may order financial penalties of hundreds of millions, potentially billions.

These awards are based not on real financial harm but funds the tribunal officials determine the company might otherwise have made. The government may have to abandon its policy. It becomes hesitant to passing future laws of a similar nature, for fear of being sued.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as corporations take cues from each other, and investment funds bankroll lawsuits in return for a share of the settlements. The outcome? Democratic sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the choices enacted by legislatures is that this provision has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Last year, activists won a great victory at the High Court. The justice ruled that plans to excavate the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the questionable argument that the mine would have had no impact on national carbon targets. The Labour government then withdrew the permission the previous administration had issued. Currently, this victory faces being overturned by an foreign court reporting to only the entities filing the suit.

During August, a corporate entity whose ultimate owners are located in the tax haven initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was set up to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this could amount to. Who is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot Sir Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation disputes it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was convened, we learned from a government response that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case so far, but it seems likely that he will utilise the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming $16bn: an amount representing half government’s annual revenue. Included in the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine critically depends on.

Empty Promises and Escalating Risks

Politicians promised that these events were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “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 barely touches the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms grasp the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has come to pass. Recently, energy and extraction companies have initiated a record number of cases against nations rich and poor, challenging – like the example of the UK mine – official measures to prevent climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP