Hello, Overseas Tycoons and Corporations! Please Proceed and Sue the UK for Vast Sums.

Can you reckon our system of government works? Maybe similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. The law is maintained by the courts. That's it. Well, that used to be how it used to work. Not anymore.

The Emergence of Offshore Courts

In the modern era, foreign corporations, or the billionaires that control them, can sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies allow no right of appeal or judicial review. The general public are unable to file a case to them, and neither can our government, or even businesses headquartered in this country. They are open solely for businesses based overseas.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it can award compensation of vast sums, even billions.

These awards are based not on tangible damages but money the arbitrators determine the company could potentially have made. The administration may have to rescind the measure. It becomes deterred from enacting future policies of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as firms observe each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The result? Sovereignty and democratic governance are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the decisions taken by elected bodies is that this provision has been inserted – without democratic mandate, and frequently under conditions of profound opacity – within bilateral investment treaties.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the senior court. The judge determined that proposals to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have had zero effect on climate commitments. The new government then withdrew the consent the former government had issued. Currently, this victory could be compromised by an foreign court accountable to only the entities filing the suit.

During August, a firm whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was set up to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had received permission to proceed. The public has no clear indication how much this might be. Who is acting on its behalf challenging the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The administration makes a decision, the national judiciary upholds it, then a foreign company disputes it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

The Russian Challenge

Simultaneously that the court on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to contest the penalties the UK enacted against him following the war in Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, seeking a colossal sum: equivalent to half of state's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

Empty Promises and Escalating Risks

The public was told that such things were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, told us: “We’ve signed trade agreement after trade deal and there has not been a issue in the past.” A consultant on this matter labelled activists of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries should be concerned by ISDS claims. Predictions that “when companies begin to understand the authority they’ve been granted, they will turn their attention from the poorer states to the developed economies” were met with general mockery.

That threat has come to pass. In the current period, energy and mining firms have initiated a record number of cases against nations rich and poor, contesting – as in the case of the UK mine – government attempts to halt global warming. Corporations have so far won vast sums via ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP