Hello, Foreign Magnates and Firms! Please Proceed and Sue the UK for Vast Sums.

How do you understand our democratic process functions? Maybe similar to this. We elect MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Yet, that used to be how it operated in the past. No longer.

The Rise of Offshore Tribunals

Nowadays, international firms, along with the oligarchs behind them, have the power to sue nation states for the laws they pass, at offshore tribunals composed of business advocates. The cases are held behind closed doors. Unlike our courts, these panels provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even companies operating from this country. They are open only to businesses based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

This compensation constitute not real financial harm but compensation the panel members determine the company might otherwise have made. The government might be compelled to rescind the measure. It becomes deterred from passing future laws in that area, for fear of incurring a lawsuit.

A System Growing Exponentially

Record numbers of disputes are being initiated, as corporations observe each other, and investment funds bankroll lawsuits for a share of a portion of the awards. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the rulings enacted by parliaments is that this provision has been inserted – without democratic mandate, and frequently under an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The UK Coalmine

A year ago, activists secured a significant win at the senior court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on our carbon budgets. The incoming administration later cancelled the consent the Tories had granted. Now, this success faces being overturned by an foreign court reporting to no one but the companies petitioning it.

In August, a firm whose beneficial owners are based in the tax haven filed a lawsuit against the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

The company is suing the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this might be. Which individual is acting on its behalf against the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Geoffrey Cox. The government makes a decision, the domestic court validates it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was appointed, information emerged from a government response 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’ll use the tribunal to challenge the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, seeking a colossal sum: half that government’s annual revenue. Included in the legal team representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in using frozen state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over democratic administrations might be preventing the finance Ukraine urgently requires.

Empty Promises and Mounting Costs

Politicians promised that these scenarios were not possible. Years ago, a senior politician, advocating for the most significant and hazardous of all these agreements, stated: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An adviser on this matter accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by such legal actions. Warnings that “once firms start to realise the authority they now possess, they will turn their attention from the poorer states to the developed economies” were dismissed with general mockery.

That warning has now materialised. In the current period, energy and mining firms have initiated a record number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to stop climate breakdown. Firms 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