Greetings, Foreign Magnates and Firms! Kindly Come and Litigate Against the UK for Billions of Pounds.

Can you understand our democratic process functions? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. The law are enforced by the courts. End of story. Yet, that’s how it used to work. Those days are over.

The Rise of Offshore Arbitration Panels

Today, international firms, along with the billionaires who own them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by commercial attorneys. The cases are held away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, including enterprises operating from this country. Access is granted only to corporations operating from foreign soil.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation constitute not real financial harm but funds the tribunal officials decide the company would perhaps have made. The government could be forced to rescind the measure. It is discouraged from introducing similar legislation of a similar nature, for fear of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of disputes are being brought, as corporations take cues from each other, and private equity bankroll lawsuits in return for a cut of the awards. The outcome? Sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump domestic law and the decisions made by elected bodies is that this clause has been inserted – without public consent, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Specific Example: The Whitehaven Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The justice found that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the previous government, which had endorsed the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the permission the former government had approved. Now, this success could be compromised by an offshore tribunal answering to only the corporations filing the suit.

Last August, a company whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. Recently a arbitration panel in Washington DC was set up to hear it.

This firm is litigating against the UK for the revenue it might have made if the mine had received permission to proceed. We have no idea how much this sum represents. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company contests it through an unaccountable offshore tribunal, and a elected official represents its behalf.

The Russian Case

On the same day that the panel on the coalmine case was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case at present, but it appears probable that he’ll use the arbitration process to contest the penalties the UK levied against him subsequent to the Russian aggression. He has previously filed a claim against a small nation on these grounds, demanding $16bn: an amount representing half government’s yearly budget. Included in the lawyers on his side? a prominent lawyer, married to the previous PM.

International law scholars argue that the EU’s hesitation in utilising seized Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Threats

Politicians promised that such things wouldn’t happen. Previously, a former prime minister, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression seemed to be that solely developing countries should be concerned by ISDS claims. Predictions that “when companies begin to understand the power bestowed upon them, they will shift their focus from the vulnerable countries to the wealthy nations” were met with widespread derision.

That prediction has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of claims against nations rich and poor, contesting – similar to the Whitehaven project – official measures to halt global warming. Companies have thus far won vast sums through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP