Welcome, Foreign Tycoons and Corporations! Please Come and Litigate Against the UK for Billions of Pounds.

What is your understand our system of government functions? Maybe similar to this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that was how it once functioned. No longer.

The Advent of Shadow Tribunals

Nowadays, foreign corporations, or the billionaires that control them, can sue nation states for the policies they pass, at secret arbitration panels staffed by corporate lawyers. The cases are conducted in secret. Unlike our courts, these tribunals provide no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, including companies headquartered in this country. The door is open only to corporations registered abroad.

If a tribunal rules that a law or policy may compromise the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

This compensation constitute not tangible damages but compensation the arbitrators decide the company would perhaps have made. The state could be forced to abandon its policy. It becomes deterred from enacting future policies in that area, due to the risk of being sued.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and investment funds fund legal actions for a share of a share of the settlements. The result? National sovereignty and democratic governance are turning into unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions enacted by legislatures is that this clause has been inserted – without democratic mandate, and often in conditions of profound opacity – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge found 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 endorsed the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government subsequently revoked the permission the former government had approved. Today, this legal outcome is under threat by an secret arbitration panel accountable to no one but the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the Cayman Islands filed a lawsuit challenging the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

The claimant is suing the UK for the money it would have generated if the mine had been permitted to commence operations. The public has little idea how much this might be. What legal team is representing it against the state? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The government passes a law, the domestic court supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case so far, but it is highly possible that he may employ the arbitration process to fight the penalties the UK enacted against him following the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, seeking a colossal sum: an amount representing half state's annual revenue. Included in the legal team acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars believe that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Growing Costs

The public was told that these scenarios could not occur. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has never been a problem in the past.” An expert on this topic labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies start to realise the power bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, fossil fuel and extraction companies have initiated a record number of claims against nations rich and poor, challenging – like the example of the UK mine – official measures to halt global warming. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP