Greetings, Foreign Magnates and Companies! Please Come and Litigate Against the UK for Vast Sums.

Can you perceive our system of government functions? Perhaps similar to this. We elect MPs. They vote on bills. If a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it used to work. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, foreign corporations, or the wealthy individuals that control them, are able to litigate against governments for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses operating from this country. Access is granted solely for entities operating from foreign soil.

When a secret court finds that a law or policy might diminish the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These awards are based not on tangible damages but money the panel members decide the company might otherwise have made. The government could be forced to abandon its policy. It is hesitant to passing future laws of a similar nature, for fear of incurring a lawsuit.

A System Running Rampant

Historically high figures of disputes are being brought, as firms observe each other, and hedge funds finance suits in return for a share of the awards. The result? Democratic sovereignty and democratic governance are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the choices made by legislatures is that this clause has been written – without public consent, and frequently under a climate of extreme secrecy – into trade treaties.

A Concrete Instance: The Cumbrian Coal Mine

Last year, activists secured a significant win at the High Court. The presiding officer found that plans to dig the first major coal mine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government then withdrew the licence the former government had issued. Now, this legal outcome could be compromised by an foreign court accountable to exclusively the companies filing the suit.

During August, a corporate entity whose final controllers are located in the Cayman Islands initiated proceedings challenging the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is suing the UK for the profits it might have made if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Who is serving as its counsel in opposition to the UK administration? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration makes a decision, the high court supports it, then a overseas corporation challenges it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

Simultaneously that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case so far, but it is highly possible that he’ll use the tribunal to fight the penalties the UK enacted against him after the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, demanding sixteen billion dollars: half that government’s yearly income. Among the counsel acting for him in that case? the wife of a former prime minister, married to the ex-UK leader.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its financial support package arises from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that these events wouldn’t happen. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, declared: “Britain has agreed to investment treaty after trade deal and we have never seen a case in the past.” An adviser on this issue labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That prediction has come to pass. In the current period, energy and mining firms have filed a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars by using ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP