Welcome, International Magnates and Corporations! Kindly Proceed and Sue the UK for Vast Sums.

Can you understand our system of government operates? It could be something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that was how it once functioned. Those days are over.

The Rise of Offshore Courts

Nowadays, international firms, along with the wealthy individuals that control them, can sue nation states for the laws they pass, at private courts composed of commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these bodies allow no avenue for appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even businesses based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it may order damages of vast sums, potentially billions.

These sums constitute not real financial harm but money the panel members determine the company might otherwise have made. The state may have to rescind the measure. It is deterred from passing future laws of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and hedge funds finance suits for a share of a share of the settlements. The result? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the rulings taken by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the high court. The justice determined that proposals to dig the first new deep coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have zero effect on national carbon targets. The new government subsequently revoked the licence the former government had approved. Currently, this legal outcome could be compromised by an secret arbitration panel accountable to only the entities filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. The previous week a tribunal in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to go ahead. Citizens have no idea how much this might be. Who is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The state makes a decision, the high court supports it, then a international entity disputes it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

Concurrently that the panel on the coal mine dispute was convened, it was revealed from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case at present, but it appears probable that he may employ the tribunal to challenge the penalties the UK enacted against him subsequent to the war in Ukraine. He has already started suing Luxembourg for this reason, seeking $16bn: an amount representing half nation's annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts argue that the EU’s delay in using frozen Russian assets as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This remarkable, unaccountable authority over democratic administrations could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that these scenarios were not possible. Years ago, a government leader, championing the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” A consultant on this matter described activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies begin to understand the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were met with scepticism.

That prediction is now a reality. In the current period, energy and extraction companies have initiated a record number of claims against nations rich and poor, challenging – similar to the UK mine – state efforts to halt climate breakdown. Firms have to date won $114bn via ISDS, of which energy giants have secured the majority. That equates to the combined GDP