Greetings, International Magnates and Companies! Please Proceed and Litigate Against the UK for Billions of Pounds.

What is your reckon our democratic process functions? Perhaps along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is upheld by the courts. That's it. However, that used to be how it used to work. No longer.

The Emergence of Shadow Tribunals

Nowadays, foreign corporations, and the wealthy individuals who own them, have the power to sue elected administrations for the laws they pass, at private courts composed of commercial attorneys. Such disputes are held away from public scrutiny. Unlike our courts, these tribunals grant no opportunity to appeal or legal review. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open solely for corporations based overseas.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions, even billions.

These awards represent not actual losses but funds the tribunal officials conclude the company would perhaps have made. The state may have to drop the legislation. It becomes discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and private equity finance suits in exchange for a portion of the settlements. The outcome? Democratic sovereignty and democratic governance are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings enacted by elected bodies is that this clause has been written – absent public approval, and typically amid a climate of profound opacity – within international trade agreements.

A Concrete Example: The UK Coalmine

Twelve months ago, environmental campaigners secured a significant win at the high court. The justice determined that schemes to open the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the Conservative government, which had accepted the questionable argument that the mine could have no consequence on our carbon budgets. The new government then withdrew the licence the former government had approved. Currently, this legal outcome faces being overturned by an offshore tribunal accountable to exclusively the corporations filing the suit.

Last August, a firm whose beneficial owners are based in the offshore financial centre lodged a claim against the UK government. The previous week a tribunal in the United States was convened to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. The public has no clear indication how much this might be. Who is serving as its counsel against the UK administration? A member of parliament, and ex-law officer in the previous government, the noted patriot Geoffrey Cox. The state passes a law, the domestic court validates it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a sitting MP works for its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was established, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it appears probable that he will utilise the arbitration process to fight the restrictions the UK imposed on him following the war in Ukraine. He has started suing Luxembourg with similar intent, claiming $16bn: half that nation's yearly income. Part of the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised state funds as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. Previously, a senior politician, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this topic accused critics of “exaggeration … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that exclusively weaker states needed to fear ISDS claims. Predictions that “when companies start to realise the influence bestowed upon them, they will shift their focus from the weak nations to the developed economies” were met with scepticism.

That threat has come to pass. This year, energy and mining firms have initiated a historic level of claims against nations across the economic spectrum, opposing – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Firms have so far won vast sums by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP