Hello, Overseas Magnates and Corporations! Please Come and Litigate Against the UK for Billions.

How do you perceive our democratic process works? Maybe something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. The law is maintained by the courts. That's it. Well, that was how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals who own them, can sue nation states for the policies they pass, at secret arbitration panels composed of business advocates. Such disputes are held in secret. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even companies operating from this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but compensation the panel members conclude the company might otherwise have made. The state may have to drop the legislation. It is discouraged from enacting future policies in that area, due to the risk of being sued.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as firms observe each other, and investment funds fund legal actions for a share of a share of the awards. The consequence? National sovereignty and popular rule are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the decisions taken by elected bodies is that this stipulation has been written – absent public approval, and frequently under a climate of total confidentiality – into international trade agreements.

A Concrete Instance: The UK Coalmine

A year ago, a conservation group secured a significant win at the High Court. The justice found that plans to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on national carbon targets. The Labour government later cancelled the licence the previous administration had granted. Currently, this victory faces being overturned by an secret arbitration panel answering to no one but the companies petitioning it.

Last August, a firm whose ultimate owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in the US capital was convened to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this sum represents. What legal team is serving as its counsel against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot the MP. The state makes a decision, the domestic court supports it, then a international entity disputes it through an secretive private court, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was established, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are nothing of the case to date, but it is highly possible that he’ll use the ISDS mechanism to challenge the penalties the UK enacted against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg on these grounds, demanding $16bn: an amount representing half state's annual revenue. Part of the legal team representing him there? the wife of a former prime minister, wife of the previous PM.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be sued in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

Politicians promised that these events could not occur. Previously, a senior politician, championing the largest and riskiest of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” An adviser on this issue labelled critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations needed to fear ISDS claims. Warnings that “when companies grasp the authority they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That threat has now materialised. This year, fossil fuel and resource corporations have filed a record number of claims against nations rich and poor, contesting – similar to the UK mine – state efforts to stop global warming. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That is equivalent to the combined GDP