Welcome, Foreign Tycoons and Firms! Please Proceed and Litigate Against the UK for Billions of Pounds.

How do you perceive our democratic process functions? It could be something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that was how it used to work. Those days are over.

The Advent of Offshore Courts

Today, international firms, along with the oligarchs that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are held in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including businesses based in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal finds that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions, even billions.

These sums constitute not tangible damages but compensation the panel members determine the company would perhaps have made. The state might be compelled to abandon its policy. It will be discouraged from enacting future policies of a similar nature, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as firms learn from each other, and hedge funds finance suits in return for a share of the takings. The consequence? Democratic sovereignty and democracy are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override national legislation and the decisions enacted by parliaments is that this clause has been written – without public consent, and often in a climate of total confidentiality – within international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the high court. The judge determined that schemes to excavate the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The incoming administration later cancelled the licence the previous administration had approved. Currently, this success is under threat by an offshore tribunal accountable to no one but the companies filing the suit.

In August, a firm whose final controllers reside in the offshore financial centre lodged a claim challenging the UK government. Recently a dispute settlement body in the US capital was set up to adjudicate on it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been allowed to commence operations. The public has no idea how much this might be. Who is serving as its counsel against the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The government enacts a policy, the domestic court validates it, then a overseas corporation contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case at present, but it appears probable that he will utilise the arbitration process to challenge the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, claiming a colossal sum: equivalent to half of state's annual revenue. Among the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as security for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Escalating Threats

The public was told that such things were not possible. Years ago, a senior politician, promoting the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade deal after trade deal and there has never been a issue in the past.” A consultant on this matter accused campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “once firms grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That warning has come to pass. This year, oil and gas and extraction companies have filed a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to halt climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP