Hello, International Tycoons and Corporations! Please Proceed and Sue the UK for Vast Sums.

Can you perceive our system of government functions? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. End of story. However, that used to be how it once functioned. Not anymore.

The Advent of Shadow Courts

In the modern era, overseas companies, or the wealthy individuals who own them, can sue nation states for the regulations they pass, at private courts composed of commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. The general public cannot take a case to them, nor can our government, or even businesses operating from this country. They are open only to entities based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These sums are based not on real financial harm but compensation the tribunal officials decide the company would perhaps have made. The government may have to abandon its policy. It is hesitant to introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as companies take cues from each other, and private equity finance suits in return for a cut of the awards. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions enacted by parliaments is that this provision has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside trade treaties.

A Real-World Case: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The judge found that schemes to open the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the licence the previous administration had issued. Now, this success faces being overturned by an secret arbitration panel answering to exclusively the corporations petitioning it.

During August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was convened to consider the case.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to go ahead. The public has no idea how much this might be. Who is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot the MP. The government passes a law, the high court upholds it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

The Russian Lawsuit

Simultaneously that the court on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case to date, but it appears probable that he’ll use the arbitration process to challenge the restrictions the UK levied against him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, claiming $16bn: an amount representing half nation's annual revenue. Included in the lawyers on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists believe that the EU’s hesitation in utilising seized state funds as guarantee for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Costs

The public was told that these events wouldn’t happen. Previously, a government leader, championing the largest and riskiest of all these agreements, stated: “The UK has signed trade agreement upon trade deal and there has not been a case in the past.” A consultant on this matter described critics of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “once firms start to realise the authority bestowed upon them, they will shift their focus from the poorer states to the developed economies” were dismissed with general mockery.

That prediction has now materialised. In the current period, oil and gas and mining firms have filed a historic level of cases against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP