Welcome, International Tycoons and Companies! Please Come and Take Legal Action Against the UK for Billions.

How do you perceive our democratic process functions? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. The law is upheld by the courts. End of story. However, that was how it used to work. Those days are over.

The Emergence of Offshore Tribunals

In the modern era, foreign corporations, along with the wealthy individuals that control them, have the power to sue governments for the policies they pass, at private courts made up of business advocates. Such disputes take place in secret. Unlike our courts, these panels allow no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel finds that a legislative action might diminish the corporation’s projected profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation represent not tangible damages but money the panel members determine the company would perhaps have made. The administration might be compelled to rescind the measure. It is deterred from passing future laws in that area, worried about incurring a lawsuit.

A Process Running Rampant

Historically high figures of legal actions are being initiated, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The outcome? National sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices enacted by elected bodies is that this provision has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge ruled that proposals to dig the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on national carbon targets. The Labour government later cancelled the licence the former government had granted. Now, this victory faces being overturned by an secret arbitration panel reporting to no one but the entities petitioning it.

Last August, a firm whose ultimate owners are located in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in the United States was established to hear it.

This firm is suing the UK for the money it would have generated if the mine had been permitted to proceed. The public has little idea how much this might be. What legal team is serving as its counsel challenging the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state 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 works for its behalf.

The Russian Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it appears probable that he will utilise the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has already filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that state's yearly budget. Among the counsel representing him there? Cherie Blair, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in utilising seized state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that these scenarios were not possible. Years ago, a senior politician, promoting 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.” An adviser on this topic labelled campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the influence they now possess, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That prediction has come to pass. Recently, energy and resource corporations have initiated a unprecedented number of suits against nations rich and poor, contesting – like the example of the Whitehaven project – official measures to halt global warming. Companies have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP