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

Can you reckon our democratic process functions? Perhaps something like this. We elect MPs. They debate and pass bills. If a majority is secured, the bills become law. Statutes is upheld by the courts. End of story. Yet, that’s how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, or the billionaires who own them, can sue nation states for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, just as our government, including enterprises based in this country. They are open solely for businesses registered abroad.

Should an arbitration panel determines that a legislative action could harm the corporation’s projected profits, it may order damages of hundreds of millions, running into billions.

These awards represent not tangible damages but funds the tribunal officials decide the company could potentially have made. The administration could be forced to rescind the measure. It will be hesitant to passing future laws in that area, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as firms take cues from each other, and hedge funds finance suits for a share of a cut of the awards. The consequence? National sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the decisions made by legislatures is that this provision has been incorporated – absent public approval, and typically amid an atmosphere of total confidentiality – into trade treaties.

A Specific Instance: The Cumbrian Coal Mine

A year ago, a conservation group won a great victory at the high court. The justice determined that plans to excavate the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on our carbon budgets. The new government later cancelled the licence the Tories had issued. Now, this victory faces being overturned by an offshore tribunal reporting to exclusively the companies petitioning it.

During August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was convened to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been allowed to proceed. We have little idea how much this sum represents. Which individual is representing it against the UK administration? A sitting MP, and previous senior legal advisor in the outgoing administration, the noted patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official represents its behalf.

A Sanctions Challenge

Simultaneously that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case so far, but it appears probable that he will utilise the tribunal to challenge the penalties the UK levied against him after the Russian aggression. He has already filed a claim against another European state for this reason, claiming $16bn: equivalent to half of nation's annual revenue. Part of the counsel representing him there? the wife of a former prime minister, wife of the former British prime minister.

International law scholars believe that the EU’s hesitation in using frozen Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that such things could not occur. Years ago, a former prime minister, championing the biggest and most dangerous of all these agreements, declared: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” A consultant on this topic described campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by ISDS claims. Cautionary notes that “when companies start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were dismissed with general mockery.

That prediction has come to pass. Recently, oil and gas and resource corporations have filed a unprecedented number of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to prevent environmental catastrophe. Corporations have to date won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP