Welcome, Overseas Tycoons and Firms! Kindly Proceed and Take Legal Action Against the UK for Vast Sums.

What is your understand our democratic process functions? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. End of story. Well, that used to be how it once functioned. Those days are over.

The Rise of Offshore Tribunals

Today, foreign corporations, or the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals made up of business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even businesses based in this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation are based not on tangible damages but compensation the arbitrators determine the company would perhaps have made. The state could be forced to drop the legislation. It will be deterred from passing future laws of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as companies observe each other, and private equity fund legal actions in return for a portion of the awards. The outcome? Sovereignty and popular rule are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices taken by parliaments is that this provision has been incorporated – without public consent, and frequently under an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Case: The Cumbrian Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The judge found that plans to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government later cancelled the permission the former government had issued. Currently, this legal outcome is under threat by an secret arbitration panel accountable to exclusively the companies bringing the case.

In August, a company whose ultimate owners reside in the tax haven lodged a claim against the UK government. Last week a tribunal in the United States was set up to hear it.

This firm is litigating against the UK for the revenue it would have generated if the mine had received permission to go ahead. We have no clear indication how much this sum represents. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The administration makes a decision, the national judiciary validates it, then a foreign company contests it through an secretive offshore tribunal, and a elected official represents its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him after the Russian aggression. He has filed a claim against another European state for this reason, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that such things wouldn’t happen. In 2014, a former prime minister, championing the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has not been a problem in the past.” An adviser on this topic accused campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by general mockery.

That threat has come to pass. This year, energy and extraction companies have filed a historic level of suits against nations across the economic spectrum, opposing – similar to the UK mine – state efforts to halt global warming. Companies have to date won $114bn by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP