Greetings, Foreign Magnates and Corporations! Please Come and Sue the UK for Vast Sums.

How do you understand our democratic process works? Perhaps similar to this. The public votes for MPs. They debate and pass bills. When a majority is secured, the bills are enacted as law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Not anymore.

The Advent of Offshore Courts

Nowadays, foreign corporations, and the wealthy individuals behind them, have the power to sue nation states for the regulations they pass, at private courts made up of business advocates. Such disputes are conducted away from public scrutiny. Unlike our courts, these panels provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to corporations registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These awards represent not real financial harm but funds the panel members determine the company might otherwise have made. The state could be forced to rescind the measure. It is deterred from enacting future policies along the same lines, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being initiated, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a cut of the settlements. The result? Sovereignty and democratic governance are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede national legislation and the rulings taken by parliaments is that this stipulation has been written – without public consent, and frequently under an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Twelve months ago, a conservation group won a great victory at the high court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have zero effect on national carbon targets. The Labour government then withdrew the licence the Tories had granted. Now, this legal outcome faces being overturned by an secret arbitration panel accountable to only the companies filing the suit.

Last August, a firm whose beneficial owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was set up to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to proceed. The public has little idea how much this might be. Who is acting on its behalf challenging the state? An elected representative, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The government enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case to date, but it appears probable that he will utilise the tribunal to challenge the penalties the UK levied against him subsequent to the invasion of Ukraine. He has filed a claim against a small nation with similar intent, seeking a colossal sum: half that government’s annual revenue. Part of the counsel acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts argue that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that these events wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An expert on this matter labelled activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Predictions that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That prediction is now a reality. This year, oil and gas and mining firms have filed a historic level of suits against nations across the economic spectrum, challenging – like the example of the Whitehaven project – government attempts to stop environmental catastrophe. Firms have so far won $114bn via ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP