Greetings, Foreign Magnates and Corporations! Kindly Come and Litigate Against the UK for Vast Sums.

Can you perceive our political system functions? It could be along the lines of this. Citizens choose MPs. They vote on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. Simple as that. However, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, have the power to sue governments for the policies they pass, at offshore tribunals made up of corporate lawyers. The cases are conducted away from public scrutiny. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, and neither can our government, including enterprises based in this country. They are open only to corporations based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation are based not on actual losses but compensation the tribunal officials determine the company would perhaps have made. The administration may have to abandon its policy. It becomes discouraged from passing future laws of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as corporations learn from each other, and private equity bankroll lawsuits in exchange for a share of the awards. The consequence? Sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump domestic law and the rulings taken by parliaments is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – into international trade agreements.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the high court. The judge found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the licence the former government had approved. Now, this success is under threat by an secret arbitration panel accountable to exclusively the companies filing the suit.

Last August, a firm whose final controllers are based in the offshore financial centre lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was set up to hear it.

This firm is suing the UK for the profits it would have generated if the mine had been permitted to proceed. The public has no clear indication how much this sum represents. Who is representing it challenging the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The administration makes a decision, the domestic court supports it, then a international entity challenges it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case so far, but it appears probable that he will utilise the tribunal to contest the restrictions the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against another European state with similar intent, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the counsel on his side? Cherie Blair, married to the ex-UK leader.

Trade specialists contend that the EU’s delay in utilising seized state funds as collateral for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over sovereign states might be preventing the finance Ukraine desperately needs.

False Assurances and Growing Risks

The public was told that these events could not occur. In 2014, a former prime minister, championing the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and there has not been a problem in the past.” An expert on this matter accused critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression was crafted to be that solely developing countries had to worry about ISDS claims. Predictions that “as corporations start to realise the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were met with widespread derision.

That threat has come to pass. This year, energy and resource corporations have filed a historic level of cases against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to halt environmental catastrophe. Companies have so far won $114bn via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP