Welcome, International Magnates and Corporations! Please Come and Litigate Against the UK for Billions.

How do you reckon our democratic process works? It could be along the lines of this. The public votes for 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 used to be how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

In the modern era, overseas companies, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. The general public are barred from bringing a case to them, nor can our government, or even companies headquartered in this country. The door is open solely for businesses registered abroad.

If a tribunal rules that a legislative action might diminish the corporation’s expected profits, it may order financial penalties of vast sums, running into billions.

This compensation constitute not tangible damages but funds the tribunal officials decide the company would perhaps have made. The administration may have to drop the legislation. It becomes hesitant to passing future laws in that area, worried about being sued.

A Process Spiralling Out of Control

Record numbers of disputes are being brought, as firms take cues from each other, and investment funds finance suits in exchange for a cut of the settlements. The result? Democratic sovereignty and democracy are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the choices taken by parliaments is that this clause has been written – absent public approval, and frequently under a climate of profound opacity – within trade treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the senior court. The judge found that plans to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine would have zero effect on climate commitments. The Labour government then withdrew the licence the Tories had issued. Now, this victory is under threat by an offshore tribunal accountable to no one but the entities bringing the case.

In August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The company is suing the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no idea how much this might be. What legal team is representing it challenging the UK administration? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the tribunal to challenge the restrictions the UK levied against him after the war in Ukraine. He has previously started suing a small nation on these grounds, demanding $16bn: half that nation's yearly income. Among the legal team on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s delay in utilising seized state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these scenarios could not occur. In 2014, a senior politician, promoting the largest and riskiest of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” A consultant on this issue accused activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with scepticism.

That warning has come to pass. In the current period, energy and mining firms have initiated a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – official measures to halt global warming. Firms have thus far won vast sums via ISDS, of which energy giants have obtained the majority. That equates to the combined GDP