Hello, Overseas Tycoons and Corporations! Please Proceed and Litigate Against the UK for Billions of Pounds.

How do you understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is upheld by the courts. End of story. Yet, that used to be how it used to work. No longer.

The Emergence of Secret Tribunals

Nowadays, overseas companies, along with the billionaires that control them, are able to litigate against governments for the policies they pass, at private courts composed of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these panels grant no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even businesses headquartered in this country. The door is open exclusively to corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, potentially billions.

These awards are based not on tangible damages but funds the panel members decide the company might otherwise have made. The government may have to drop the legislation. It will be discouraged from enacting future policies in that area, due to the risk of facing litigation.

A System Running Rampant

Historically high figures of cases are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The result? Democratic sovereignty and popular rule are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the choices enacted by legislatures is that this clause has been inserted – without public consent, and typically amid conditions of profound opacity – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the High Court. The presiding officer determined that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on our carbon budgets. The new government subsequently revoked the licence the previous administration had issued. Today, this success faces being overturned by an foreign court answering to exclusively the entities bringing the case.

In August, a company whose beneficial owners are located in the tax haven initiated proceedings challenging the UK government. Last week a tribunal in Washington DC was convened to hear it.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to commence operations. Citizens have little idea how much this sum represents. Who is representing it in opposition to the British government? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the domestic court upholds it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

The Russian Case

On the same day that the panel on the coal mine dispute was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK imposed on him following the invasion of Ukraine. He has already started suing a small nation with similar intent, claiming a colossal sum: equivalent to half of government’s yearly budget. Among the legal team acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Costs

We were assured that these scenarios were not possible. In 2014, a senior politician, championing the biggest and most dangerous of all these agreements, stated: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Predictions that “once firms grasp the influence they now possess, they will turn their attention from the weak nations to the developed economies” were met with general mockery.

That warning is now a reality. This year, oil and gas and resource corporations have filed a historic level of claims against nations rich and poor, opposing – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP