Welcome, Foreign Magnates and Companies! Please Come and Sue the UK for Billions.

What is your understand our democratic process operates? Maybe similar to this. Citizens choose MPs. They legislate on bills. If a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. However, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

Today, foreign corporations, along with the billionaires who own them, can sue governments for the policies they pass, at private courts staffed by corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to corporations registered abroad.

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

These awards constitute not actual losses but money the tribunal officials conclude the company would perhaps have made. The state may have to abandon its policy. It will be discouraged from passing future laws of a similar nature, worried about facing litigation.

A Mechanism Growing Exponentially

Record numbers of legal actions are being brought, as firms take cues from each other, and investment funds fund legal actions for a share of a portion of the awards. The consequence? Democratic sovereignty and democracy are becoming too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the rulings enacted by legislatures is that this clause has been written – without public consent, and often in a climate of extreme secrecy – within international trade agreements.

A Specific Example: The Cumbrian Coal Mine

Last year, activists secured a significant win at the high court. The justice ruled that schemes to open the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had accepted the questionable argument that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the licence the former government had issued. Now, this legal outcome could be compromised by an foreign court answering to only the entities filing the suit.

During August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court supports it, then a international entity challenges it through an undemocratic private court, and a elected official represents its behalf.

The Russian Case

On the same day that the court on the coalmine case was appointed, it was revealed from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case to date, but it appears probable that he may employ the arbitration process to fight the sanctions the UK imposed on him following the Russian aggression. He has already started suing another European state on these grounds, seeking $16bn: equivalent to half of nation's annual revenue. Included in the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Growing Threats

The public was told that these events were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty after trade deal and we have never seen a case in the past.” An expert on this topic accused campaigners of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Predictions that “as corporations grasp the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. Recently, energy and extraction companies have filed a record number of cases against nations rich and poor, opposing – as in the case of the UK mine – official measures to prevent climate breakdown. Corporations have to date won vast sums via ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP