Hello, International Tycoons and Companies! Kindly Come and Take Legal Action Against the UK for Vast Sums.

What is your perceive our democratic process works? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills pass into law. Statutes are enforced by the courts. End of story. However, that was how it once functioned. Those days are over.

The Emergence of Secret Tribunals

Nowadays, international firms, or the wealthy individuals behind them, are able to litigate against governments for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases are held in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. Access is granted only to entities operating from foreign soil.

When a secret court rules that a legislative action might diminish the corporation’s expected profits, it can award compensation of hundreds of millions, even billions.

These sums represent not tangible damages but funds the tribunal officials decide the company could potentially have made. The administration may have to rescind the measure. It is deterred from enacting future policies along the same lines, for fear of facing litigation.

A System Growing Exponentially

Historically high figures of legal actions are being brought, as corporations take cues from each other, and hedge funds fund legal actions in return for a portion of the settlements. The outcome? National sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices taken by parliaments is that this provision has been written – absent public approval, and frequently under a climate of profound opacity – into international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, environmental campaigners won a great victory at the high court. The justice determined that schemes to dig the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on climate commitments. The Labour government subsequently revoked the licence the Tories had issued. Currently, this victory faces being overturned by an offshore tribunal accountable to exclusively the corporations bringing the case.

Last August, a company whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. The public has no clear indication how much this could amount to. Which individual is representing it against the UK administration? An elected representative, and ex-law officer in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a elected official works for its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case to date, but it seems likely that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the Russian aggression. He has already started suing a small nation on these grounds, seeking a colossal sum: an amount representing half state's yearly income. Among the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

International law scholars contend that the EU’s hesitation in using frozen state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This extraordinary, unaccountable authority over sovereign states might be preventing the funds Ukraine desperately needs.

Empty Promises and Growing Costs

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” An expert on this topic accused activists of “scaremongering … the fact is, ISDS has little impact on the UK much”. The overall message seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That threat is now a reality. In the current period, oil and gas and resource corporations have lodged a historic level of claims against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Firms have thus far won $114bn through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP