Greetings, Foreign Magnates and Companies! Please Proceed and Sue the UK for Vast Sums.

What is your perceive our system of government operates? Perhaps similar to this. The public votes for MPs. They vote on bills. If a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Yet, that was how it once functioned. No longer.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires that control them, can sue elected administrations for the policies they pass, at offshore tribunals composed of corporate lawyers. These proceedings take place behind closed doors. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. You or I are unable to file a case to them, just as our government, including companies headquartered in this country. The door is open only to corporations operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s expected profits, it can award damages of vast sums, even billions.

This compensation represent not real financial harm but money the arbitrators determine the company might otherwise have made. The state may have to rescind the measure. It is hesitant to enacting future policies along the same lines, worried about facing litigation.

A System Running Rampant

Record numbers of disputes are being brought, as companies take cues from each other, and hedge funds finance suits in exchange for a portion of the awards. The result? Sovereignty and popular rule are becoming too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by legislatures is that this stipulation has been inserted – without public consent, and frequently under a climate of total confidentiality – within bilateral investment treaties.

A Specific Case: The UK Coalmine

Last year, a conservation group won a great victory at the high court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had no consequence on national carbon targets. The Labour government then withdrew the licence the Tories had approved. Now, this legal outcome faces being overturned by an foreign court accountable to no one but the companies filing the suit.

Last August, a company whose ultimate owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the United States was established to hear it.

The company is litigating against the UK for the money it could have earned if the mine had received permission to go ahead. We have no clear indication how much this could amount to. Who is serving as its counsel in opposition to the state? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The administration enacts a policy, the national judiciary validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK imposed on him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Among the counsel on his side? Cherie Blair, wife of the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over elected governments could be blocking the funds Ukraine desperately needs.

Misleading Claims and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, advocating for the most significant and hazardous of all investment pacts, declared: “The UK has signed investment treaty upon trade deal and there has never been a issue in the past.” A consultant on this topic described campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the strong ones” were met with scepticism.

That prediction has now materialised. This year, energy and extraction companies have initiated a record number of suits against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Firms have to date won $114bn through ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP