Welcome, International Tycoons and Corporations! Kindly Proceed and Sue the UK for Billions of Pounds.

What is your perceive our democratic process works? Perhaps similar to this. We elect MPs. They legislate on bills. Should a majority is secured, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Advent of Shadow Courts

Nowadays, overseas companies, along with the billionaires behind them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of business advocates. Such disputes are held in secret. In contrast to domestic courts, these bodies allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a government measure may compromise the corporation’s projected profits, it has the power to grant financial penalties of vast sums, even billions.

These sums constitute not real financial harm but money the arbitrators decide the company would perhaps have made. The government might be compelled to abandon its policy. It will be deterred from passing future laws of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Record numbers of cases are being filed, as companies observe each other, and private equity fund legal actions in return for a portion of the settlements. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings taken by elected bodies is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of extreme secrecy – into trade treaties.

A Concrete Example: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the high court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for a generation, in northwest England, were unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on climate commitments. The incoming administration subsequently revoked the permission the previous administration had approved. Now, this success is under threat by an foreign court answering to no one but the corporations bringing the case.

In August, a firm whose ultimate owners are located in the tax haven lodged a claim challenging the UK government. Recently a dispute settlement body in Washington DC was established to adjudicate on it.

The company is litigating against the UK for the revenue it could have earned if the mine had received permission to proceed. The public has little idea how much this sum represents. Which individual is serving as its counsel in opposition to the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government passes a law, the domestic court validates it, then a foreign company challenges it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he will utilise the tribunal to contest the sanctions the UK enacted against him subsequent to the war in Ukraine. He has previously filed a claim against Luxembourg for this reason, seeking $16bn: an amount representing half state's yearly budget. Among the legal team on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that such things could not occur. In 2014, a government leader, advocating for the largest and riskiest of all such treaties, stated: “Britain has agreed to investment treaty upon trade deal and there has not been a case in the past.” An adviser on this topic labelled activists of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states needed to fear these lawsuits. Predictions that “as corporations grasp the power they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning has now materialised. Recently, energy and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, contesting – as in the case of the Cumbrian coalmine – state efforts to stop environmental catastrophe. Corporations have so far won $114bn via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP