Greetings, Overseas Tycoons and Corporations! Please Come and Litigate Against the UK for Billions.

What is your reckon our democratic process functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Advent of Offshore Tribunals

Nowadays, international firms, or the billionaires that control them, have the power to sue governments for the policies they pass, at offshore tribunals staffed by corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses headquartered in this country. The door is open solely for corporations based overseas.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These sums constitute not real financial harm but funds the arbitrators conclude the company might otherwise have made. The state could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Unprecedented levels of cases are being initiated, as firms learn from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The result? National sovereignty and democracy are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the decisions taken by legislatures is that this clause has been incorporated – without public consent, and often in conditions of profound opacity – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The presiding officer found that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no impact on national carbon targets. The new government subsequently revoked the consent the former government had issued. Currently, this legal outcome faces being overturned by an foreign court reporting to exclusively the companies bringing the case.

During August, a corporate entity whose ultimate owners are based in the tax haven initiated proceedings against the UK government. Recently a tribunal in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to proceed. We have no idea how much this sum represents. Who is acting on its behalf challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The administration passes a law, the domestic court upholds it, then a international entity disputes it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the coalmine case was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows nothing of the case so far, but it appears probable that he may employ the tribunal to challenge the sanctions the UK enacted against him after the Russian aggression. He has already started suing Luxembourg with similar intent, demanding a colossal sum: half that nation's yearly budget. Included in the legal team on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Escalating Risks

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, stated: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this issue described critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “when companies grasp the authority they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has come to pass. In the current period, energy and resource corporations have initiated a historic level of suits against nations rich and poor, opposing – like the example of the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP