Welcome, International Tycoons and Corporations! Please Come and Sue the UK for Billions of Pounds.

Can you perceive our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, along with the oligarchs behind them, are able to litigate against governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these tribunals grant no avenue for appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even companies operating from this country. They are open only to corporations based overseas.

When a secret court finds that a law or policy could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but compensation the panel members decide the company might otherwise have made. The state could be forced to drop the legislation. It is hesitant to enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of disputes are being filed, as firms observe each other, and private equity fund legal actions for a share of a share of the awards. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the rulings taken by legislatures is that this provision has been incorporated – without public consent, and frequently under conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the questionable argument that the mine could have zero effect on climate commitments. The new government later cancelled the licence the former government had issued. Now, this victory could be compromised by an secret arbitration panel reporting to only the corporations petitioning it.

In August, a corporate entity whose ultimate owners reside in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to commence operations. We have no clear indication how much this sum represents. Who is acting on its behalf against the British government? A sitting MP, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The government passes a law, the national judiciary validates it, then a foreign company disputes it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case at present, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him after the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, seeking $16bn: an amount representing half government’s yearly budget. Part of the lawyers on his side? a prominent lawyer, wife of the previous PM.

Legal experts believe that the EU’s hesitation in utilising seized Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things wouldn’t happen. Previously, a government leader, advocating for the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and there has not been a issue in the past.” A consultant on this matter described critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “as corporations start to realise the authority they now possess, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. Recently, energy and extraction companies have filed a record number of suits against nations rich and poor, opposing – similar to the UK mine – state efforts to stop environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP