Greetings, Foreign Magnates and Corporations! Kindly Come and Sue the UK for Vast Sums.

Can you reckon our system of government operates? Perhaps something like this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills are enacted as law. The law is maintained by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Emergence of Shadow Tribunals

Nowadays, overseas companies, and the wealthy individuals behind them, have the power to sue governments for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. The general public cannot take a case to them, just as our government, including companies based in this country. The door is open solely for corporations based overseas.

If a tribunal rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These awards are based not on tangible damages but funds the arbitrators decide the company would perhaps have made. The state could be forced to drop the legislation. It becomes hesitant to enacting future policies in that area, worried about facing litigation.

A Process Growing Exponentially

Unprecedented levels of disputes are being filed, as companies take cues from each other, and private equity finance suits for a share of a share of the settlements. The consequence? National sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede a country's own laws and the choices enacted by elected bodies is that this clause has been inserted – absent public approval, and often in conditions of profound opacity – into trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had no consequence on climate commitments. The Labour government subsequently revoked the licence the Tories had issued. Now, this legal outcome is under threat by an foreign court reporting to exclusively the corporations petitioning it.

Last August, a company whose ultimate owners are based in the Cayman Islands filed a lawsuit versus the UK government. Last week a tribunal in the US capital was established to hear it.

The company is suing the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Who is serving as its counsel against the British government? A member of parliament, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The government enacts a policy, the national judiciary supports it, then a overseas corporation contests it through an secretive private court, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the coalmine case was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know scarce of the case at present, but it is highly possible that he may employ the arbitration process to contest the penalties the UK imposed on him after the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, claiming $16bn: equivalent to half of government’s yearly budget. Included in the lawyers on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised state funds as security for its loan to Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Threats

The public was told that these events wouldn’t happen. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has never been a case in the past.” A consultant on this matter described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression seemed to be that solely developing countries should be concerned by such legal actions. Cautionary notes that “once firms start to realise the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by general mockery.

That threat has now materialised. In the current period, oil and gas and mining firms have initiated a unprecedented number of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – state efforts to stop climate breakdown. Companies have so far won $114bn by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That is equivalent to the combined GDP