Greetings, International Magnates and Firms! Kindly Come and Litigate Against the UK for Vast Sums.

How do you reckon our democratic process operates? Perhaps something like this. We elect MPs. They legislate on bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Emergence of Secret Arbitration Panels

In the modern era, international firms, or the oligarchs behind them, are able to litigate against nation states for the regulations they pass, at private courts made up of corporate lawyers. Such disputes are conducted in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even businesses based in this country. They are open only to businesses operating from foreign soil.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These sums are based not on actual losses but funds the panel members conclude the company would perhaps have made. The state may have to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of legal actions are being brought, as corporations observe each other, and hedge funds fund legal actions in exchange for a portion of the settlements. The consequence? National sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and often in an atmosphere of total confidentiality – within international trade agreements.

A Real-World Instance: The Whitehaven Coalmine

A year ago, environmental campaigners won a great victory at the senior court. The presiding officer determined that proposals to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine would have no consequence on national carbon targets. The Labour government subsequently revoked the consent the former government had issued. Today, this victory could be compromised by an secret arbitration panel answering to exclusively the entities petitioning it.

Last August, a corporate entity whose ultimate owners reside in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in the United States was set up to consider the case.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. The public has no idea how much this sum represents. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government makes a decision, the high court validates it, then a foreign company disputes it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case at present, but it seems likely that he may employ the ISDS mechanism to fight the sanctions the UK imposed on him after the Russian aggression. He has already initiated proceedings against Luxembourg for this reason, seeking a colossal sum: half that government’s yearly budget. Part of the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

Legal experts argue that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine arises from Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Mounting Threats

Politicians promised that such things could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a problem in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by widespread derision.

That warning is now a reality. In the current period, oil and gas and mining firms have filed a record number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to stop climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP