Hello, Overseas Tycoons and Companies! Please Come and Sue the UK for Vast Sums.

What is your perceive our democratic process works? Maybe similar to this. Citizens choose MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. End of story. Well, that was how it operated in the past. Not anymore.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, or the wealthy individuals who own them, can sue governments for the policies they pass, at offshore tribunals staffed by business advocates. Such disputes take place in secret. Unlike our courts, these bodies grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but money the arbitrators conclude the company could potentially have made. The administration might be compelled to abandon its policy. It becomes hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as firms take cues from each other, and private equity fund legal actions for a share of a portion of the takings. The result? Democratic sovereignty and democratic governance are becoming too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the rulings taken by legislatures is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of extreme secrecy – within bilateral investment treaties.

A Specific Example: The UK Coalmine

Twelve months ago, environmental campaigners won a great victory at the High Court. The judge ruled that plans to excavate the first major coal mine in the UK for three decades, in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have zero effect on climate commitments. The new government then withdrew the permission the Tories had granted. Currently, this legal outcome faces being overturned by an foreign court answering to no one but the entities petitioning it.

During August, a firm whose ultimate owners are located in the offshore financial centre lodged a claim challenging the UK government. Last week a tribunal in Washington DC was set up to hear it.

The company is suing the UK for the profits it might have made if the mine had been allowed to proceed. Citizens have no idea how much this could amount to. What legal team is serving as its counsel against the state? An elected representative, and former attorney-general in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a foreign company disputes it through an unaccountable offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Lawsuit

On the same day that the court on the mining lawsuit was established, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know scarce of the case to date, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has previously filed a claim against a small nation on these grounds, claiming a colossal sum: an amount representing half government’s yearly budget. Part of the counsel on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars contend that the EU’s procrastination in using frozen oligarchs' funds as collateral for its financial support package arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

False Assurances and Mounting Costs

We were assured that such things were not possible. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “We’ve signed trade deal upon trade deal and there has never been a problem in the past.” A consultant on this issue labelled campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the authority they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and mining firms have initiated a unprecedented number of claims against nations both wealthy and developing, contesting – similar to the UK mine – state efforts to halt environmental catastrophe. Firms have so far won $114bn through ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP