Hello, Foreign Magnates and Corporations! Kindly Proceed and Sue the UK for Vast Sums.

Can you reckon our democratic process functions? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, and the wealthy individuals who own them, have the power to sue governments for the laws they pass, at private courts staffed by commercial attorneys. The cases take place away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, including businesses headquartered in this country. The door is open solely for entities based overseas.

When a secret court rules that a government measure could harm the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards constitute not actual losses but compensation the arbitrators decide the company could potentially have made. The government could be forced to rescind the measure. It will be discouraged from introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? National sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump a country's own laws and the choices made by elected bodies is that this clause has been inserted – absent public approval, and typically amid conditions of total confidentiality – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, environmental campaigners secured a significant win at the high court. The justice found that schemes to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government later cancelled the consent the former government had approved. Now, this success could be compromised by an offshore tribunal accountable to no one but the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim challenging the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had received permission to go ahead. The public has no idea how much this might be. What legal team is acting on its behalf challenging the British government? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The government enacts a policy, the high court supports it, then a foreign company disputes it through an unaccountable arbitration panel, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the court on the mining lawsuit was established, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK imposed on him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming sixteen billion dollars: half that nation's yearly income. Among the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Growing Costs

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled critics of “alarmism … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the power they now possess, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. In the current period, energy and mining firms have initiated a record number of suits against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Firms have to date won vast sums via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP