Hello, International Tycoons and Corporations! Please Proceed and Litigate Against the UK for Billions.

How do you reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. The law is maintained by the courts. Simple as that. Yet, that’s how it once functioned. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, and the wealthy individuals behind them, have the power to sue elected administrations for the policies they pass, at private courts made up of corporate lawyers. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or judicial review. The general public are unable to file a case to them, nor can our government, or even enterprises based in this country. The door is open only to entities based overseas.

If a tribunal finds that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, running into billions.

This compensation represent not actual losses but compensation the arbitrators determine the company would perhaps have made. The government may have to abandon its policy. It is deterred from introducing similar legislation of a similar nature, for fear of being sued.

A Mechanism Running Rampant

Record numbers of cases are being initiated, as corporations take cues from each other, and private equity bankroll lawsuits for a share of a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings enacted by legislatures is that this stipulation has been incorporated – without democratic mandate, and often in a climate of extreme secrecy – inside trade treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the high court. The justice ruled that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The new government later cancelled the consent the previous administration had granted. Now, this legal outcome faces being overturned by an offshore tribunal accountable to only the corporations bringing the case.

In August, a corporate entity whose beneficial owners are located in the tax haven filed a lawsuit against the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has little idea how much this could amount to. Which individual is representing it in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the high court validates it, then a international entity contests it through an unaccountable arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are scarce of the case so far, but it appears probable that he may employ the arbitration process to challenge the sanctions the UK enacted against him after the war in Ukraine. He has already started suing a small nation for this reason, seeking $16bn: equivalent to half of nation's yearly income. Part of the legal team on his side? Cherie Blair, wife of the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen oligarchs' funds as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Risks

The public was told that these scenarios were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all investment pacts, declared: “Britain has agreed to trade agreement after trade deal and there has never been a problem in the past.” A consultant on this issue described critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by ISDS claims. Predictions that “as corporations grasp the power they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were dismissed with scepticism.

That prediction has come to pass. In the current period, fossil fuel and mining firms have lodged a historic level of suits against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to halt global warming. Companies have to date won vast sums via ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP