Hello, Overseas Magnates and Companies! Please Come and Litigate Against the UK for Billions.

How do you perceive our political system works? Maybe something like this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. The law is maintained by the courts. That's it. Yet, that’s how it used to work. No longer.

The Rise of Offshore Arbitration Panels

Today, overseas companies, and the wealthy individuals who own them, have the power to sue nation states for the policies they pass, at secret arbitration panels composed of business advocates. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies allow no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even companies operating from this country. They are open solely for corporations registered abroad.

If a tribunal determines that a law or policy might diminish the corporation’s expected profits, it can award damages of vast sums, potentially billions.

These awards are based not on real financial harm but compensation the tribunal officials conclude the company could potentially have made. The government may have to abandon its policy. It is deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Record numbers of cases are being brought, as firms take cues from each other, and investment funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override a country's own laws and the rulings made by parliaments is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of extreme secrecy – within trade treaties.

A Specific Case: The Whitehaven Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine would have zero effect on climate commitments. The Labour government later cancelled the licence the Tories had granted. Today, this success faces being overturned by an offshore tribunal reporting to no one but the entities filing the suit.

In August, a company whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. The public has no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state makes a decision, the high court supports it, then a international entity challenges it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was convened, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know nothing of the case so far, but it is highly possible that he may employ the tribunal to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has filed a claim against another European state on these grounds, demanding $16bn: equivalent to half of state's yearly budget. Part of the legal team representing him there? a prominent lawyer, wife of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that these scenarios could not occur. In 2014, a senior politician, championing the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal after trade deal and there has never been a case in the past.” An expert on this matter labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries needed to fear such legal actions. Predictions that “once firms grasp the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with scepticism.

That prediction has now materialised. Recently, fossil fuel and extraction companies have filed a record number of claims against nations rich and poor, opposing – similar to the UK mine – state efforts to halt environmental catastrophe. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP