Hello, Overseas Tycoons and Companies! Please Proceed and Litigate Against the UK for Billions of Pounds.

Can you perceive our democratic process works? Perhaps along the lines of this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it used to work. Not anymore.

The Advent of Offshore Arbitration Panels

In the modern era, international firms, along with the billionaires behind them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held away from public scrutiny. Unlike our courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens cannot take a case to them, just as our government, including companies based in this country. The door is open only to corporations operating from foreign soil.

If a tribunal rules that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These sums represent not real financial harm but money the panel members conclude the company could potentially have made. The state might be compelled to abandon its policy. It is hesitant to introducing similar legislation of a similar nature, due to the risk of facing litigation.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being initiated, as firms learn from each other, and private equity bankroll lawsuits for a share of a cut of the takings. The outcome? Sovereignty and democratic governance are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the choices made by legislatures is that this stipulation has been inserted – absent public approval, and typically amid a climate of total confidentiality – inside bilateral investment treaties.

A Concrete Case: The Cumbrian Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The judge ruled that schemes to open the first major coal mine in the UK for a generation, in northwest England, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have no impact on national carbon targets. The incoming administration later cancelled the licence the former government had issued. Now, this victory could be compromised by an offshore tribunal accountable to exclusively the entities petitioning it.

In August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Which individual is representing it challenging the state? An elected representative, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the national judiciary validates it, then a foreign company contests it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. Details are little of the case to date, but it seems likely that he will utilise the tribunal to contest the penalties the UK imposed on him after the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, demanding a colossal sum: equivalent to half of government’s yearly budget. Part of the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” An expert on this matter accused critics of “scaremongering … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations had to worry about these lawsuits. Cautionary notes that “as corporations grasp the power they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were dismissed with general mockery.

That warning has come to pass. This year, energy and extraction companies have lodged a historic level of cases against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to stop climate breakdown. Companies have thus far won $114bn via ISDS, of which oil majors have secured eighty-four billion dollars. That equates to the combined GDP