Hello, Foreign Magnates and Corporations! Kindly Proceed and Sue the UK for Billions.

What is your understand our system of government functions? It could be similar to this. We elect MPs. They legislate on bills. When a majority is achieved, the bills pass into law. Legislation is maintained by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Rise of Shadow Courts

In the modern era, international firms, and the oligarchs who own them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held away from public scrutiny. Unlike our courts, these bodies provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including enterprises based in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it may order damages of hundreds of millions, running into billions.

These awards represent not real financial harm but compensation the arbitrators decide the company could potentially have made. The state may have to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of disputes are being initiated, as corporations take cues from each other, and investment funds finance suits in return for a portion of the awards. The consequence? National sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings enacted by parliaments is that this clause has been incorporated – without democratic mandate, and frequently under an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Twelve months ago, activists achieved a major legal triumph at the high court. The justice found that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The new government later cancelled the licence the Tories had issued. Currently, this success could be compromised by an secret arbitration panel accountable to exclusively the companies bringing the case.

In August, a corporate entity whose beneficial owners are based in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was established to adjudicate on it.

The company is suing the UK for the profits it would have generated if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The government enacts a policy, the domestic court upholds it, then a international entity challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was established, we learned 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 at present, but it seems likely that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against another European state with similar intent, seeking a colossal sum: equivalent to half of nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, secretive influence over elected governments could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these events were not possible. Years ago, a government leader, championing 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 case in the past.” An adviser on this issue labelled critics of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Warnings that “as corporations grasp the authority bestowed upon them, they will shift their focus from the weak nations to the wealthy nations” were met with scepticism.

That threat is now a reality. This year, fossil fuel and resource corporations have initiated a unprecedented number of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – official measures to halt global warming. Firms have thus far won $114bn by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP