Greetings, Foreign Tycoons and Companies! Kindly Proceed and Sue the UK for Vast Sums.

How do you reckon our political system operates? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, overseas companies, along with the wealthy individuals that control them, can sue elected administrations for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are conducted away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, including companies headquartered in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal determines that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

These awards are based not on real financial harm but money the arbitrators conclude the company would perhaps have made. The government may have to rescind the measure. It will be hesitant to enacting future policies in that area, for fear of being sued.

A Process Running Rampant

Record numbers of legal actions are being filed, as firms observe each other, and investment funds bankroll lawsuits in exchange for a share of the awards. The consequence? National sovereignty and democratic governance are becoming too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it can supersede national legislation and the decisions taken by legislatures is that this provision has been incorporated – without public consent, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the senior court. The judge ruled that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the licence the former government had granted. Now, this success could be compromised by an foreign court answering to no one but the entities bringing the case.

In August, a company whose ultimate owners reside in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a arbitration panel in the US capital was established to consider the case.

The company is litigating against 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 sum represents. What legal team is acting on its behalf challenging the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state makes a decision, the high court validates it, then a international entity disputes it through an undemocratic offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. We know nothing of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, seeking a colossal sum: equivalent to half of government’s yearly income. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

International law scholars believe that the EU’s delay in utilising seized state funds as guarantee for its financial support package stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the money Ukraine urgently requires.

False Assurances and Growing Risks

We were assured that these events wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” A consultant on this issue described critics of “exaggeration … in reality, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries needed to fear such legal actions. Warnings that “when companies start to realise the authority they now possess, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That prediction has now materialised. In the current period, energy and resource corporations have filed a record number of cases against nations across the economic spectrum, challenging – like the example of the UK mine – government attempts to stop global warming. Firms have to date won $114bn via ISDS, of which oil majors have secured the majority. That equates to the combined GDP