Greetings, Overseas Oligarchs and Firms! Please Come and Sue the UK for Billions.

Can you understand our democratic process works? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that was how it operated in the past. Not anymore.

The Advent of Shadow Arbitration Panels

Today, international firms, and the oligarchs behind them, can sue nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are conducted away from public scrutiny. Unlike our courts, these tribunals grant no right of appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to entities registered abroad.

When a secret court rules that a law or policy could harm the corporation’s expected profits, it may order financial penalties of vast sums, potentially billions.

These awards are based not on actual losses but compensation the tribunal officials determine the company could potentially have made. The government could be forced to rescind the measure. It will be discouraged from passing future laws in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of disputes are being filed, as companies observe each other, and hedge funds finance suits in return for a portion of the awards. The consequence? Sovereignty and democracy are turning into prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the choices enacted by elected bodies is that this clause has been written – without public consent, and typically amid a climate of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The presiding officer determined that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no consequence on climate commitments. The new government then withdrew the permission the Tories had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the companies petitioning it.

In August, a company whose final controllers are located in the offshore financial centre lodged a claim against the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to go ahead. Citizens have no idea how much this could amount to. Who is serving as its counsel against the state? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the high court validates it, then a international entity challenges it through an undemocratic private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the panel on the coalmine case was appointed, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it seems likely that he will utilise the arbitration process to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, claiming sixteen billion dollars: equivalent to half of state's yearly income. Part of the lawyers on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

Misleading Claims and Growing Costs

We were assured that such things wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all these agreements, declared: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An adviser on this topic accused activists of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations grasp the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That threat has come to pass. This year, fossil fuel and extraction companies have lodged a unprecedented number of suits against nations rich and poor, contesting – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which oil majors have been awarded the majority. That is equivalent to the combined GDP