Welcome, International Oligarchs and Firms! Kindly Proceed and Sue the UK for Billions of Pounds.

How do you reckon our democratic process works? It could be along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. That's it. Well, that used to be how it once functioned. No longer.

The Advent of Shadow Tribunals

Today, international firms, along with the wealthy individuals who own them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are held away from public scrutiny. Unlike our courts, these bodies grant no avenue for appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. The door is open solely for businesses based overseas.

If a tribunal finds that a government measure might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These sums constitute not tangible damages but compensation the arbitrators conclude the company might otherwise have made. The government might be compelled to drop the legislation. It becomes deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A System Running Rampant

Record numbers of cases are being filed, as firms learn from each other, and investment funds bankroll lawsuits in return for a portion of the settlements. The consequence? National sovereignty and popular rule are turning into unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the decisions enacted by elected bodies is that this provision has been inserted – without democratic mandate, and often in an atmosphere of extreme secrecy – into international trade agreements.

A Real-World Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the high court. The judge determined that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The new government subsequently revoked the consent the Tories had approved. Today, this victory could be compromised by an foreign court reporting to exclusively the corporations bringing the case.

During August, a firm whose ultimate owners are based in the tax haven lodged a claim versus the UK government. Last week a arbitration panel in the US capital was set up to adjudicate on it.

This firm is suing the UK for the profits it would have generated if the mine had received permission to proceed. We have little idea how much this could amount to. What legal team is representing it in opposition to the state? A member of parliament, and former attorney-general in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation disputes it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know little of the case at present, but it seems likely that he’ll use the arbitration process to challenge the restrictions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against a small nation for this reason, seeking $16bn: an amount representing half state's yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments could be blocking the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

The public was told that these scenarios wouldn’t happen. Years ago, a government leader, championing the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal upon trade deal and there has not been a case in the past.” A consultant on this issue described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that only poorer nations needed to fear ISDS claims. Cautionary notes that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That warning is now a reality. In the current period, energy and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, opposing – as in the case of the UK mine – state efforts to stop environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP