Hello, International Magnates and Companies! Kindly Come and Litigate Against the UK for Vast Sums.

How do you perceive our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Advent of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies headquartered in this country. The door is open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a legislative action may compromise the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.

These sums represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The government might be compelled to drop the legislation. It becomes deterred from enacting future policies of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as corporations take cues from each other, and private equity fund legal actions in exchange for a share of the settlements. The outcome? Sovereignty and democracy are becoming too costly.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices taken by parliaments is that this clause has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the high court. The justice ruled that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no impact on climate commitments. The Labour government later cancelled the permission the Tories had approved. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to only the entities bringing the case.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the United States was established to consider the case.

The claimant is litigating against the UK for the profits it might have made if the mine had been allowed to proceed. We have no idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity contests it through an undemocratic private court, and a elected official acts on its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he may employ the tribunal to challenge the restrictions the UK imposed on him after the Russian aggression. He has already filed a claim against another European state for this reason, demanding $16bn: an amount representing half nation's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments could be blocking the funds Ukraine critically depends on.

Misleading Claims and Escalating Risks

Politicians promised that these scenarios could not occur. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this topic described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear such legal actions. Predictions that “once firms start to realise the influence they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat has now materialised. Recently, fossil fuel and extraction companies have lodged a record number of suits against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop climate breakdown. Companies have thus far won $114bn by using ISDS, of which energy giants have secured eighty-four billion dollars. That represents the combined GDP