Welcome, Foreign Tycoons and Corporations! Please Proceed and Take Legal Action Against the UK for Billions of Pounds.

How do you perceive our political system functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that’s how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, foreign corporations, along with the billionaires behind them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases take place away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open exclusively to corporations operating from foreign soil.

When a secret court rules that a legislative action could harm the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These awards represent not real financial harm but funds the panel members conclude the company would perhaps have made. The government may have to drop the legislation. It will be hesitant to enacting future policies along the same lines, due to the risk of being sued.

A Process Running Rampant

Record numbers of cases are being filed, as firms observe each other, and hedge funds finance suits in return for a cut of the settlements. The outcome? National sovereignty and popular rule are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the choices taken by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Last year, a conservation group secured a significant win at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine could have zero effect on national carbon targets. The Labour government then withdrew the licence the previous administration had issued. Now, this success could be compromised by an foreign court accountable to no one but the corporations bringing the case.

During August, a company whose final controllers reside in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to go ahead. We have little idea how much this could amount to. Which individual is representing it challenging the state? A member of parliament, and ex-law officer in the previous government, the noted patriot the MP. The state makes a decision, the high court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official represents its behalf.

A Sanctions Case

On the same day that the panel on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case so far, but it appears probable that he will utilise the arbitration process to fight the penalties the UK levied against him after the war in Ukraine. He has previously filed a claim against a small nation on these grounds, demanding $16bn: an amount representing half nation's yearly budget. Among the lawyers on his side? the wife of a former prime minister, wife of the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, undemocratic power over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these events wouldn’t happen. In 2014, a senior politician, promoting the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” An adviser on this issue labelled critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “when companies start to realise the influence they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. In the current period, oil and gas and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the UK mine – government attempts to halt climate breakdown. Corporations have thus far won vast sums via ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP