Welcome, International Magnates and Corporations! Please Come and Sue the UK for Billions.

Can you perceive our political system works? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that was how it once functioned. Those days are over.

The Emergence of Offshore Courts

Today, international firms, and the oligarchs that control them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of commercial attorneys. The cases are held in secret. Unlike our courts, these tribunals grant no opportunity to appeal or judicial review. You or I cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open only to entities registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards are based not on actual losses but money the arbitrators conclude the company would perhaps have made. The government might be compelled to rescind the measure. It is deterred from passing future laws in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and hedge funds fund legal actions in return for a share of the awards. The outcome? National sovereignty and popular rule are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the rulings taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under conditions of profound opacity – into international trade agreements.

A Real-World Example: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the High Court. The judge ruled that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration then withdrew the consent the former government had issued. Currently, this victory faces being overturned by an offshore tribunal answering to only the companies filing the suit.

During August, a firm whose beneficial owners are located in the offshore financial centre initiated proceedings versus the UK government. Last week a dispute settlement body in the US capital was set up to hear it.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. We have no idea how much this sum represents. Which individual is representing it challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary upholds it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP represents its behalf.

A Sanctions Case

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case so far, but it appears probable that he will utilise the tribunal to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has previously started suing a small nation with similar intent, seeking $16bn: equivalent to half of state's annual revenue. Among the legal team acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized state funds as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over democratic administrations might be preventing the money Ukraine urgently requires.

Empty Promises and Growing Threats

We were assured that such things could not occur. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An expert on this topic accused activists of “alarmism … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms begin to understand the power they’ve been granted, they will turn their attention from the weak nations to the developed economies” were dismissed with general mockery.

That prediction has now materialised. This year, fossil fuel and resource corporations have initiated a record number of suits against nations both wealthy and developing, contesting – like the example of the Whitehaven project – official measures to prevent global warming. Corporations have thus far won one hundred and fourteen billion dollars by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP