Welcome, Overseas Oligarchs and Firms! Please Proceed and Sue the UK for Billions of Pounds.

How do you reckon our democratic process works? It could be something like this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that used to be how it once functioned. Not anymore.

The Rise of Offshore Arbitration Panels

In the modern era, foreign corporations, along with the billionaires that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels made up of business advocates. These proceedings are conducted behind closed doors. Unlike our courts, these panels allow no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, or even companies headquartered in this country. They are open solely for businesses based overseas.

When a secret court rules that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums constitute not actual losses but compensation the arbitrators conclude the company might otherwise have made. The state may have to drop the legislation. It is deterred from introducing similar legislation along the same lines, worried about being sued.

A Process Growing Exponentially

Unprecedented levels of cases are being filed, as firms learn from each other, and investment funds fund legal actions in exchange for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the rulings taken by elected bodies is that this clause has been written – without democratic mandate, and often in conditions of profound opacity – within international trade agreements.

A Specific Example: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge determined that plans to excavate the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The Labour government subsequently revoked the licence the Tories had approved. Now, this success is under threat by an foreign court accountable to only the companies petitioning it.

Last August, a firm whose final controllers reside in the offshore financial centre lodged a claim versus the UK government. Recently a arbitration panel in the United States was set up to hear it.

This firm is seeking compensation from the UK for the revenue it would have generated if the mine had been permitted to go ahead. The public has no idea how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The government enacts a policy, the domestic court supports it, then a overseas corporation challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Challenge

Simultaneously that the panel on the coalmine case was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, an oligarch. 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 enacted against him following the war in Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: an amount representing half nation's yearly budget. Part of the lawyers on his side? a prominent lawyer, wife of the previous PM.

Legal experts argue that the EU’s hesitation in using frozen state funds as security for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, stated: “The UK has signed trade deal after trade deal and there has not been a case in the past.” An expert on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat is now a reality. In the current period, fossil fuel and mining firms have lodged a unprecedented number of claims against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP