Greetings, Overseas Oligarchs and Corporations! Please Proceed and Litigate Against the UK for Billions of Pounds.

Can you understand our democratic process works? It could be similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills become law. Legislation are enforced by the courts. End of story. Yet, that used to be how it operated in the past. No longer.

The Emergence of Offshore Courts

Today, foreign corporations, along with the oligarchs that control them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases take place behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, nor can our government, including companies headquartered in this country. The door is open solely for corporations based overseas.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it may order damages of vast sums, running into billions.

These sums constitute not actual losses but funds the arbitrators decide the company would perhaps have made. The administration could be forced to rescind the measure. It becomes deterred from introducing similar legislation in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being filed, as firms learn from each other, and investment funds bankroll lawsuits in return for a cut of the settlements. The outcome? Sovereignty and democracy are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the choices made by elected bodies is that this provision has been written – without public consent, and frequently under conditions of profound opacity – into trade treaties.

A Real-World Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The justice determined that plans to open the first major coal mine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on our carbon budgets. The Labour government later cancelled the permission the previous administration had approved. Today, this victory faces being overturned by an secret arbitration panel accountable to only the entities filing the suit.

During August, a firm whose final controllers reside in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in Washington DC was convened 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. The public has no clear indication how much this could amount to. Which individual is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a foreign company contests it through an unaccountable private court, and a sitting MP represents its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it seems likely that he may employ the tribunal to challenge the sanctions the UK enacted against him after the invasion of Ukraine. He has filed a claim against a small nation with similar intent, demanding sixteen billion dollars: half that nation's annual revenue. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that these scenarios were not possible. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, declared: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about such legal actions. Predictions that “once firms grasp the power they’ve been granted, they will shift their focus from the weak nations to the strong ones” were met with general mockery.

That warning has come to pass. In the current period, fossil fuel and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to halt environmental catastrophe. Corporations have so far won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That represents the combined GDP