Greetings, Foreign Magnates and Firms! Please Come and Take Legal Action Against the UK for Billions.

Can you reckon our system of government functions? It could be something like this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Advent of Offshore Courts

In the modern era, foreign corporations, and the oligarchs that control them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of business advocates. Such disputes are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or legal review. You or I cannot take a case to them, nor can our government, or even companies headquartered in this country. The door is open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy may compromise the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These sums constitute not real financial harm but funds the panel members determine the company might otherwise have made. The state could be forced to rescind the measure. It will be deterred from enacting future policies along the same lines, for fear of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as firms take cues from each other, and private equity bankroll lawsuits for a share of a cut of the awards. The outcome? National sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings made by parliaments is that this clause has been incorporated – without public consent, and typically amid an atmosphere of extreme secrecy – within bilateral investment treaties.

A Specific Instance: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The presiding officer ruled that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine could have zero effect on our carbon budgets. The Labour government then withdrew the licence the previous administration had granted. Now, this success could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

During August, a firm whose beneficial owners reside in the tax haven initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was established to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. What legal team is representing it challenging the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration enacts a policy, the domestic court validates it, then a overseas corporation challenges it through an secretive private court, and a elected official works for its behalf.

A Sanctions Case

Concurrently that the tribunal on the coalmine case was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. We know little of the case at present, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him after the war in Ukraine. He has filed a claim against another European state for this reason, claiming $16bn: equivalent to half of government’s yearly income. Included in the counsel acting for him in that case? Cherie Blair, wife of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in using frozen Russian assets as collateral for its loan to Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these events were not possible. In 2014, a former prime minister, championing the largest and riskiest of all these agreements, declared: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An expert on this issue accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies begin to understand the power bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were met with widespread derision.

That threat is now a reality. Recently, energy and extraction companies have lodged a unprecedented number of cases against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – official measures to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained the majority. That represents the combined GDP