Greetings, Foreign Magnates and Companies! Kindly Come and Take Legal Action Against the UK for Billions.

What is your perceive our democratic process functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the billionaires behind them, are able to litigate against nation states for the policies they pass, at offshore tribunals made up of business advocates. These proceedings are held away from public scrutiny. In contrast to domestic courts, these panels allow no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, including companies headquartered in this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

This compensation represent not tangible damages but money the panel members determine the company would perhaps have made. The state might be compelled to drop the legislation. It will be deterred from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of disputes are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a cut of the takings. The outcome? National sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions enacted by parliaments is that this provision has been written – absent public approval, and often in conditions of extreme secrecy – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

Last year, activists achieved a major legal triumph at the High Court. The justice found that proposals to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The new government then withdrew the consent the previous administration had granted. Currently, this success could be compromised by an offshore tribunal reporting to no one but the companies petitioning it.

In August, a corporate entity whose beneficial owners reside in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in Washington DC was convened to consider the case.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been allowed to go ahead. Citizens have little idea how much this might be. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government makes a decision, the national judiciary supports it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case so far, but it seems likely that he will utilise the tribunal to fight the restrictions the UK enacted against him following the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team representing him there? Cherie Blair, wife of the previous PM.

Legal experts believe that the EU’s delay in using frozen Russian assets as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments might be preventing the finance Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that these scenarios could not occur. In 2014, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has not been a problem in the past.” A consultant on this issue accused campaigners of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “when companies start to realise the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That prediction has now materialised. In the current period, energy and extraction companies have lodged a unprecedented number of claims against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to halt environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP