Greetings, Overseas Magnates and Corporations! Please Proceed and Litigate Against the UK for Billions.

Can you perceive our democratic process functions? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation are enforced by the courts. Simple as that. Yet, that used to be how it once functioned. Those days are over.

The Rise of Offshore Arbitration Panels

Nowadays, international firms, along with the oligarchs behind them, can sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes are held behind closed doors. Differing from national judiciaries, these panels provide no avenue for appeal or oversight by judges. You or I cannot take a case to them, nor can our government, or even companies operating from this country. Access is granted solely for businesses based overseas.

When a secret court determines that a government measure could harm the corporation’s anticipated profits, it can award compensation of hundreds of millions, potentially billions.

This compensation are based not on real financial harm but money the tribunal officials decide the company could potentially have made. The government could be forced to rescind the measure. It becomes discouraged from introducing similar legislation in that area, due to the risk of facing litigation.

A Mechanism Running Rampant

Historically high figures of legal actions are being initiated, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a share of the settlements. The consequence? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the rulings made by elected bodies is that this stipulation has been incorporated – without public consent, and frequently under a climate of extreme secrecy – within bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

Last year, activists achieved a major legal triumph at the high court. The presiding officer found that plans to open the first major coal mine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The incoming administration then withdrew the permission the former government had granted. Currently, this legal outcome faces being overturned by an offshore tribunal answering to only the companies petitioning it.

In August, a company whose ultimate owners are based in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in the United States was established to adjudicate on it.

The claimant is seeking compensation from the UK for the profits it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The state makes a decision, the domestic court supports it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the court on the coalmine case was appointed, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know little of the case so far, but it seems likely that he will utilise the tribunal to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has started suing another European state for this reason, demanding a colossal sum: an amount representing half state's annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations could be blocking the funds Ukraine desperately needs.

Misleading Claims and Escalating Risks

The public was told that such things were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all these agreements, told us: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “scaremongering … the truth is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations grasp the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were dismissed with general mockery.

That warning is now a reality. Recently, oil and gas and extraction companies have initiated a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – official measures to prevent global warming. Corporations have thus far won $114bn through ISDS, of which energy giants have secured eighty-four billion dollars. That is equivalent to the combined GDP