Hello, International Magnates and Corporations! Please Come and Take Legal Action Against the UK for Billions of Pounds.

Can you reckon our system of government operates? Maybe something like this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills become law. The law are enforced by the courts. End of story. Well, that’s how it once functioned. No longer.

The Emergence of Offshore Courts

In the modern era, international firms, and the oligarchs who own them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by commercial attorneys. These proceedings take place away from public scrutiny. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, including businesses based in this country. Access is granted only to corporations based overseas.

When a secret court determines that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions, even billions.

These awards are based not on real financial harm but funds the panel members determine the company might otherwise have made. The administration may have to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as firms take cues from each other, and hedge funds fund legal actions in exchange for a portion of the awards. The consequence? National sovereignty and democratic governance are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the choices enacted by elected bodies is that this provision has been inserted – without public consent, and often in an atmosphere of profound opacity – into bilateral investment treaties.

A Real-World Instance: The Cumbrian Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice found that plans to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have had no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had issued. Today, this legal outcome is under threat by an offshore tribunal accountable to no one but the entities petitioning it.

During August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was established to adjudicate on it.

The company is suing the UK for the money it could have earned if the mine had been allowed to commence operations. We have no clear indication how much this could amount to. Which individual is representing it against the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the high court supports it, then a international entity contests it through an undemocratic arbitration panel, and a elected official works for its behalf.

An Oligarch's Case

On the same day that the panel on the coal mine dispute was convened, 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 nothing of the case at present, but it appears probable that he’ll use the tribunal to challenge the restrictions the UK levied against him after the invasion of Ukraine. He has initiated proceedings against another European state for this reason, seeking $16bn: equivalent to half of government’s annual revenue. Included in the counsel representing him there? the wife of a former prime minister, spouse of the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over elected governments may be obstructing the funds Ukraine desperately needs.

False Assurances and Growing Threats

The public was told that these events were not possible. In 2014, a senior politician, championing the largest and riskiest of all these agreements, declared: “Britain has agreed to trade deal upon trade deal and there has never been a problem in the past.” An expert on this topic described campaigners of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That warning is now a reality. Recently, energy and extraction companies have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won $114bn via ISDS, of which energy giants have secured $84bn. That represents the combined GDP