Welcome, Overseas Magnates and Companies! Kindly Proceed and Sue the UK for Vast Sums.

What is your understand our political system operates? Perhaps something like this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. Well, that used to be how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, along with the oligarchs that control them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of business advocates. These proceedings take place in secret. Unlike our courts, these tribunals provide no right of appeal or judicial review. You or I are unable to file a case to them, nor can our government, or even enterprises operating from this country. The door is open only to entities registered abroad.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it can award compensation of vast sums, potentially billions.

These sums represent not real financial harm but compensation the panel members conclude the company could potentially have made. The government might be compelled to rescind the measure. It becomes deterred from passing future laws in that area, due to the risk of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being filed, as firms observe each other, and hedge funds finance suits for a share of a portion of the awards. The outcome? Sovereignty and popular rule are becoming prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the rulings enacted by parliaments is that this stipulation has been incorporated – absent public approval, and often in a climate of extreme secrecy – inside trade treaties.

A Concrete Example: The UK Coalmine

A year ago, activists achieved a major legal triumph at the senior court. The justice found that schemes to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the Conservative government, which had accepted the extraordinary assertion that the mine would have no consequence on national carbon targets. The Labour government then withdrew the permission the Tories had issued. Now, this success faces being overturned by an secret arbitration panel answering to exclusively the entities filing the suit.

In August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings challenging the UK government. Recently a arbitration panel in Washington DC was set up to consider the case.

This firm is seeking compensation from the UK for the money it would have generated if the mine had received permission to proceed. The public has no idea how much this sum represents. Who is serving as its counsel in opposition to the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot the MP. The state passes a law, the high court validates it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. We know little of the case at present, but it seems likely that he’ll use the arbitration process to fight the sanctions the UK levied against him following the war in Ukraine. He has already initiated proceedings against a small nation with similar intent, claiming a colossal sum: equivalent to half of nation's yearly budget. Among the legal team on his side? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine arises from concerns within Belgium that it could be sued in the ISDS tribunals, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine critically depends on.

Empty Promises and Mounting Threats

The public was told that such things were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, stated: “The UK has signed trade deal upon trade deal and there has not been a issue in the past.” A consultant on this topic accused critics of “exaggeration … in reality, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the authority they now possess, they will turn their attention from the poorer states to the strong ones” were dismissed with widespread derision.

That threat has come to pass. This year, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – like the example of the UK mine – official measures to halt climate breakdown. Companies have thus far won $114bn by using ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP