Greetings, Overseas Oligarchs and Companies! Please Come and Sue the UK for Vast Sums.

Can you reckon our political system functions? It could be something like this. The public votes for MPs. They vote on bills. If a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that was how it operated in the past. No longer.

The Emergence of Shadow Courts

In the modern era, international firms, along with the billionaires behind them, have the power to sue governments for the laws they pass, at offshore tribunals composed of business advocates. These proceedings are held in secret. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. Access is granted exclusively to entities based overseas.

If a tribunal finds that a law or policy could harm the corporation’s projected profits, it has the power to grant financial penalties of vast sums, running into billions.

These sums constitute not real financial harm but money the arbitrators conclude the company would perhaps have made. The state could be forced to rescind the measure. It is hesitant to passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of legal actions are being brought, as corporations observe each other, and private equity bankroll lawsuits in exchange for a portion of the takings. The result? Sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices taken by parliaments is that this stipulation has been written – absent public approval, and often in conditions of total confidentiality – within international trade agreements.

A Specific Example: The UK Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The judge determined that schemes to open the first deep coalmine in the UK for 30 years, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine would have zero effect on our carbon budgets. The new government subsequently revoked the licence the Tories had approved. Currently, this legal outcome could be compromised by an offshore tribunal accountable to only the companies petitioning it.

In August, a firm whose beneficial owners are based in the tax haven initiated proceedings against the UK government. Last week a tribunal in the United States was convened to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. The public has little idea how much this might be. Who is acting on its behalf against the state? A sitting MP, and former attorney-general in the Conservative government, that great patriot the MP. The state passes a law, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Case

On the same day that the court on the mining lawsuit was appointed, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it is highly possible that he’ll use the arbitration process to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg for this reason, claiming sixteen billion dollars: an amount representing half government’s yearly income. Included in the lawyers representing him there? the wife of a former prime minister, married to the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine is due to Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Risks

Politicians promised that such things were not possible. Years ago, a government leader, promoting the largest and riskiest of all investment pacts, stated: “The UK has signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter described activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “once firms begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat is now a reality. In the current period, fossil fuel and resource corporations have lodged a record number of cases against nations both wealthy and developing, contesting – like the example of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Corporations have so far won vast sums via ISDS, of which energy giants have obtained $84bn. That represents the combined GDP