Welcome, International Magnates and Firms! Kindly Proceed and Litigate Against the UK for Vast Sums.

Can you reckon our political system functions? Maybe something like this. The public votes for MPs. They debate and pass bills. Should a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. Yet, that’s how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, overseas companies, and the billionaires who own them, have the power to sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. Such disputes are conducted in secret. In contrast to domestic courts, these panels provide no avenue for appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. The door is open exclusively to entities based overseas.

Should an arbitration panel finds that a government measure could harm the corporation’s projected profits, it can award financial penalties of hundreds of millions, running into billions.

These awards are based not on real financial harm but funds the panel members decide the company would perhaps have made. The administration could be forced to abandon its policy. It will be hesitant to enacting future policies along the same lines, worried about being sued.

A System Running Rampant

Unprecedented levels of disputes are being filed, as firms take cues from each other, and hedge funds finance suits in exchange for a cut of the settlements. The consequence? Sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the rulings enacted by legislatures is that this provision has been written – without democratic mandate, and typically amid conditions of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The presiding officer ruled that plans to open the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the questionable argument that the mine would have had zero effect on climate commitments. The new government then withdrew the licence the previous administration had issued. Currently, this victory faces being overturned by an offshore tribunal accountable to no one but the corporations petitioning it.

During August, a firm whose beneficial owners are based in the tax haven lodged a claim against the UK government. The previous week a tribunal in the US capital was set up to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. Citizens have little idea how much this sum represents. Which individual is acting on its behalf challenging the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The government makes a decision, the domestic court validates it, then a foreign company disputes it through an unaccountable private court, and a member of our parliament represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has filed a claim against another European state on these grounds, claiming $16bn: an amount representing half state's annual revenue. Included in the legal team on his side? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the money Ukraine critically depends on.

Empty Promises and Growing Threats

The public was told that these events could not occur. Previously, a senior politician, advocating for the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An adviser on this matter labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations had to worry about these lawsuits. Predictions that “when companies start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were greeted by scepticism.

That warning is now a reality. Recently, energy and resource corporations have filed a record number of suits against nations rich and poor, contesting – like the example of the UK mine – government attempts to prevent environmental catastrophe. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP