Hello, Overseas Magnates and Companies! Please Proceed and Litigate Against the UK for Vast Sums.

How do you perceive our democratic process operates? Perhaps something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

In the modern era, foreign corporations, or the wealthy individuals who own them, are able to litigate against elected administrations for the laws they pass, at secret arbitration panels staffed by corporate lawyers. These proceedings take place behind closed doors. Unlike our courts, these panels provide no opportunity to appeal or legal review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. The door is open exclusively to businesses based overseas.

When a secret court determines that a legislative action could harm the corporation’s projected profits, it may order damages of hundreds of millions of pounds, running into billions.

These awards constitute not real financial harm but money the arbitrators conclude the company would perhaps have made. The administration might be compelled to drop the legislation. It becomes hesitant to enacting future policies in that area, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of cases are being initiated, as corporations observe each other, and hedge funds fund legal actions in exchange for a cut of the takings. The result? National sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can override domestic law and the choices made by parliaments is that this clause has been inserted – without public consent, and frequently under conditions of total confidentiality – into trade treaties.

A Concrete Instance: The UK Coalmine

A year ago, activists won a great victory at the senior court. The presiding officer determined that schemes to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had accepted the questionable argument that the mine could have no consequence on national carbon targets. The Labour government subsequently revoked the permission the former government had granted. Currently, this victory could be compromised by an offshore tribunal reporting to exclusively the companies petitioning it.

In August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. The public has no idea how much this sum represents. Which individual is representing it against the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic private court, and a elected official represents its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian oligarch, Mikhail Fridman. The public knows scarce of the case at present, but it seems likely that he’ll use the arbitration process to contest the sanctions the UK imposed on him after the Russian aggression. He has already started suing another European state for this reason, demanding $16bn: half that state's yearly income. Included in the legal team acting for him in that case? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s delay in using frozen oligarchs' funds as collateral for its aid for Ukraine arises from Belgium’s fear that it could be taken to court in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that these scenarios were not possible. In 2014, a former prime minister, advocating for the biggest and most dangerous of all such treaties, stated: “The UK has signed trade deal upon trade deal and there has never been a problem in the past.” An expert on this issue accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies grasp the authority they now possess, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with general mockery.

That warning has now materialised. Recently, energy and extraction companies have filed a record number of suits against nations rich and poor, challenging – similar to the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Corporations have to date won vast sums by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP