Greetings, International Tycoons and Corporations! Please Proceed and Sue the UK for Vast Sums.

What is your reckon our democratic process works? Perhaps similar to this. We elect MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. The law are enforced by the courts. That's it. Well, that was how it operated in the past. Not anymore.

The Rise of Offshore Tribunals

In the modern era, overseas companies, and the wealthy individuals that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases are conducted behind closed doors. Unlike our courts, these panels grant no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open solely for businesses registered abroad.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but funds the tribunal officials decide the company might otherwise have made. The state could be forced to drop the legislation. It is hesitant to enacting future policies in that area, worried about being sued.

A System Growing Exponentially

Historically high figures of cases are being brought, as corporations take cues from each other, and investment funds fund legal actions for a share of a cut of the takings. The result? National sovereignty and democracy are becoming too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings taken by parliaments is that this provision has been inserted – absent public approval, and frequently under conditions of total confidentiality – into trade treaties.

A Specific Example: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The judge ruled that proposals to open the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the previous government, which had agreed to the extraordinary assertion that the mine could have zero effect on climate commitments. The new government subsequently revoked the permission the former government had granted. Currently, this success faces being overturned by an foreign court reporting to only the companies petitioning it.

Last August, a company whose beneficial owners reside in the tax haven initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was established to adjudicate on it.

This firm is seeking compensation from the UK for the profits it might have made if the mine had been permitted to proceed. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf challenging the state? An elected representative, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The state enacts a policy, the national judiciary upholds it, then a international entity disputes it through an undemocratic offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the court on the coal mine dispute was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case at present, but it appears probable that he’ll use the tribunal to challenge the penalties the UK imposed on him after the Russian aggression. He has initiated proceedings against Luxembourg for this reason, claiming a colossal sum: equivalent to half of nation's annual revenue. Included in the lawyers representing him there? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its financial support package stems from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that these events could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this topic labelled activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression seemed to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies grasp the authority bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were greeted by widespread derision.

That threat has come to pass. This year, energy and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, challenging – like the example of the UK mine – government attempts to prevent environmental catastrophe. Firms have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP