Welcome, Foreign Tycoons and Corporations! Kindly Come and Sue the UK for Billions of Pounds.

Can you perceive our system of government operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills are enacted as law. Legislation is upheld by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Rise of Offshore Arbitration Panels

Today, foreign corporations, along with the billionaires who own them, can sue governments for the laws they pass, at private courts composed of commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these bodies provide no right of appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, including businesses based in this country. They are open only to businesses based overseas.

When a secret court rules that a government measure could harm the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These awards constitute not tangible damages but money the panel members conclude the company would perhaps have made. The administration may have to abandon its policy. It becomes discouraged from introducing similar legislation along the same lines, for fear of facing litigation.

A System Growing Exponentially

Record numbers of cases are being filed, as companies learn from each other, and private equity finance suits in return for a cut of the awards. The consequence? Sovereignty and democratic governance are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to supersede domestic law and the decisions made by elected bodies is that this provision has been written – without public consent, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, a conservation group secured a significant win at the High Court. The justice determined that plans to dig the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine would have had no impact on our carbon budgets. The new government later cancelled the consent the Tories had approved. Currently, this victory could be compromised by an secret arbitration panel accountable to exclusively the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are located in the Cayman Islands lodged a claim against the UK government. The previous week a tribunal in Washington DC was convened to consider the case.

The claimant is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. Which individual is acting on its behalf challenging the British government? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The administration enacts a policy, the high court supports it, then a overseas corporation contests it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the court on the mining lawsuit was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case to date, but it seems likely that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against another European state for this reason, demanding $16bn: equivalent to half of state's yearly income. Among the lawyers acting for him in that case? Cherie Blair, married to the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen state funds as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Growing Costs

Politicians promised that such things could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” An expert on this issue labelled campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries needed to fear such legal actions. Predictions that “as corporations begin to understand the authority bestowed upon them, they will shift their focus from the vulnerable countries to the strong ones” were dismissed with general mockery.

That threat has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt climate breakdown. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP