Welcome, Overseas Magnates and Corporations! Please Proceed and Sue the UK for Billions.

Can you understand our democratic process works? It could be similar to this. Citizens choose MPs. They vote on bills. If a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. However, that used to be how it operated in the past. Those days are over.

The Rise of Shadow Courts

Today, international firms, along with the wealthy individuals behind them, can sue nation states for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings are conducted behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or judicial review. The general public are barred from bringing a case to them, and neither can our government, including businesses headquartered in this country. Access is granted exclusively to entities registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on tangible damages but compensation the arbitrators determine the company might otherwise have made. The government may have to drop the legislation. It will be discouraged from passing future laws along the same lines, for fear of being sued.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as corporations observe each other, and private equity fund legal actions in return for a portion of the awards. The outcome? Sovereignty and democracy are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices taken by legislatures is that this clause has been inserted – without democratic mandate, and frequently under a climate of extreme secrecy – into international trade agreements.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The justice determined that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, had been illegally sanctioned by the outgoing administration, which had agreed to the bizarre claim that the mine could have no impact on climate commitments. The new government then withdrew the permission the former government had approved. Today, this legal outcome could be compromised by an foreign court accountable to no one but the corporations petitioning it.

During August, a firm whose final controllers are located in the tax haven initiated proceedings versus the UK government. The previous week a tribunal in Washington DC was set up to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. We have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary validates it, then a overseas corporation challenges it through an secretive offshore tribunal, and a member of our parliament represents its behalf.

The Russian Case

On the same day that the court on the coalmine case was convened, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he may employ the tribunal to contest the restrictions the UK enacted against him subsequent to the Russian aggression. He has previously initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half nation's yearly budget. Part of the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

Legal experts believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This unprecedented, secretive influence over sovereign states might be preventing the funds Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic accused critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the developed economies” were greeted by scepticism.

That threat has come to pass. In the current period, oil and gas and mining firms have initiated a historic level of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to stop climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP