Greetings, Overseas Tycoons and Firms! Kindly Come and Take Legal Action Against the UK for Billions.

What is your perceive our political system works? Perhaps similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Yet, that’s how it used to work. Not anymore.

The Emergence of Offshore Arbitration Panels

Today, overseas companies, and the wealthy individuals that control them, can sue nation states for the regulations they pass, at private courts made up of business advocates. These proceedings take place behind closed doors. Unlike our courts, these tribunals allow no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, including companies operating from this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of vast sums, running into billions.

These sums are based not on tangible damages but money the arbitrators decide the company might otherwise have made. The government might be compelled to rescind the measure. It will be deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being filed, as companies observe each other, and private equity bankroll lawsuits for a share of a cut of the awards. The result? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede domestic law and the choices made by legislatures is that this stipulation has been written – without democratic mandate, and frequently under conditions of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Twelve months ago, a conservation group secured a significant win at the senior court. The judge ruled that proposals to dig the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the previous government, which had accepted the extraordinary assertion that the mine could have zero effect on our carbon budgets. The incoming administration then withdrew the consent the previous administration had granted. Now, this legal outcome faces being overturned by an offshore tribunal answering to exclusively the companies filing the suit.

In August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit versus the UK government. Recently a tribunal in Washington DC was established to hear it.

The company is suing the UK for the money it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. Who is acting on its behalf in opposition to the British government? A member of parliament, and former attorney-general in the previous government, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation challenges it through an undemocratic private court, and a elected official works for its behalf.

A Sanctions Lawsuit

On the same day that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it seems likely that he will utilise the tribunal to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has started suing Luxembourg with similar intent, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets 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 investment pact. This extraordinary, unaccountable authority over elected governments could be blocking the money Ukraine urgently requires.

Misleading Claims and Escalating Risks

The public was told that these scenarios were not possible. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and there has never been a problem in the past.” A consultant on this matter described activists of “exaggeration … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “once firms begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were greeted by scepticism.

That threat is now a reality. In the current period, energy and extraction companies have filed a historic level of suits against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – government attempts to stop global warming. Corporations have so far won $114bn via ISDS, of which energy giants have secured the majority. That represents the combined GDP