Hello, Foreign Magnates and Corporations! Kindly Come and Sue the UK for Billions.

What is your understand our democratic process works? Perhaps similar to this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. That's it. However, that used to be how it used to work. Not anymore.

The Rise of Secret Courts

Nowadays, overseas companies, along with the wealthy individuals who own them, can sue nation states for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases take place behind closed doors. In contrast to domestic courts, these panels allow no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including companies based in this country. Access is granted only to corporations registered abroad.

When a secret court finds that a government measure may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but funds the arbitrators determine the company would perhaps have made. The administration might be compelled to drop the legislation. It is deterred from enacting future policies in that area, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as companies take cues from each other, and private equity bankroll lawsuits in exchange for a cut of the takings. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the choices taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer found that schemes to open the first new deep coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the Tories had issued. Currently, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the entities petitioning it.

During August, a company whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. Last week a dispute settlement body in the US capital was set up to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. Who is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the noted patriot the MP. The administration makes a decision, the domestic court supports it, then a overseas corporation disputes it through an undemocratic private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know scarce 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 after the invasion of Ukraine. He has already started suing Luxembourg for this reason, demanding $16bn: an amount representing half state's yearly income. Part of the lawyers acting for him in that case? a prominent lawyer, spouse of the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over elected governments might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

The public was told that such things wouldn’t happen. Years ago, a government leader, championing the largest and riskiest of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this issue described critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “when companies grasp the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That warning has come to pass. Recently, energy and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to prevent global warming. Corporations have thus far won $114bn via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That equates to the combined GDP