Hello, Foreign Tycoons and Companies! Please Come and Sue the UK for Billions of Pounds.

How do you perceive our political system works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, and the billionaires that control them, have the power to sue nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held in secret. Unlike our courts, these panels provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises headquartered in this country. Access is granted exclusively to corporations operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These sums are based not on actual losses but money the arbitrators conclude the company would perhaps have made. The administration may have to rescind the measure. It becomes discouraged from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Running Rampant

Record numbers of legal actions are being initiated, as corporations take cues from each other, and private equity fund legal actions in exchange for a portion of the takings. The result? Democratic sovereignty and democracy are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions taken by elected bodies is that this clause has been inserted – without public consent, and typically amid a climate of extreme secrecy – within trade treaties.

A Real-World Case: The UK Coal Mine

A year ago, activists won a great victory at the high court. The justice determined that proposals to dig the first new deep coal mine in the UK for 30 years, in northwest England, were unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have had no impact on our carbon budgets. The incoming administration later cancelled the consent the former government had granted. Today, this legal outcome could be compromised by an foreign court answering to exclusively the entities filing the suit.

Last August, a company whose final controllers reside in the tax haven initiated proceedings challenging the UK government. Last week a arbitration panel in Washington DC was set up to consider the case.

This firm is suing the UK for the profits it might have made if the mine had been allowed to proceed. The public has little idea how much this might be. Who is acting on its behalf against the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

The Russian Challenge

On the same day that the tribunal on the mining lawsuit was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows scarce of the case to date, but it seems likely that he may employ the tribunal to fight the penalties the UK imposed on him subsequent to the Russian aggression. He has previously initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: half that government’s annual revenue. Among the legal team acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as collateral for its financial support package stems from Belgium’s fear that it could be sued in the offshore corporate courts, under a trade agreement. This extraordinary, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

False Assurances and Escalating Threats

We were assured that such things were not possible. Years ago, a former prime minister, promoting the largest and riskiest of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a problem in the past.” An adviser on this matter accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear these lawsuits. Warnings that “once firms grasp the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That threat has now materialised. Recently, fossil fuel and resource corporations have filed a unprecedented number of suits against nations rich and poor, challenging – like the example of the Cumbrian coalmine – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP