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

How do you perceive our democratic process functions? Maybe something like this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. That's it. Well, that was how it used to work. Not anymore.

The Advent of Secret Tribunals

In the modern era, foreign corporations, or the wealthy individuals behind them, have the power to sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. Such disputes are held away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, including businesses headquartered in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel determines that a government measure could harm the corporation’s projected profits, it can award compensation of vast sums, even billions.

These awards are based not on actual losses but money the arbitrators decide the company would perhaps have made. The state might be compelled to drop the legislation. It becomes hesitant to passing future laws in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being initiated, as companies take cues from each other, and hedge funds finance suits for a share of a portion of the awards. The result? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the rulings made by legislatures is that this stipulation has been incorporated – absent public approval, and frequently under a climate of total confidentiality – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Last year, a conservation group won a great victory at the high court. The judge determined that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the licence the former government had approved. Today, this success could be compromised by an secret arbitration panel reporting to no one but the companies filing the suit.

Last August, a company whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. The previous week a arbitration panel in Washington DC was established to adjudicate on it.

This firm is litigating against the UK for the revenue it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. Which individual is representing it against the state? A sitting MP, and former attorney-general in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court supports it, then a international entity challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. We know little of the case to date, but it is highly possible that he may employ the ISDS mechanism to fight the penalties the UK enacted against him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half nation's annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

International law scholars argue that the EU’s delay in utilising seized state funds as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

Misleading Claims and Mounting Risks

The public was told that such things were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to trade agreement upon trade deal and there has not been a problem in the past.” An expert on this matter described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – state efforts to stop global warming. Companies have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP