Welcome, Foreign Magnates and Companies! Please Proceed and Take Legal Action Against the UK for Billions of Pounds.

Can you perceive our political system operates? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. If a majority is achieved, the bills pass into law. Statutes are enforced by the courts. That's it. Well, that was how it used to work. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, foreign corporations, or the wealthy individuals that control them, can sue governments for the laws they pass, at offshore tribunals composed of commercial attorneys. Such disputes are held away from public scrutiny. In contrast to domestic courts, these bodies grant no opportunity to appeal or judicial review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses based in this country. The door is open solely for entities registered abroad.

If a tribunal finds that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, potentially billions.

These awards constitute not real financial harm but funds the tribunal officials conclude the company might otherwise have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of legal actions are being brought, as companies observe each other, and private equity fund legal actions for a share of a portion of the settlements. The consequence? Sovereignty and democratic governance are now too costly.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings made by parliaments is that this provision has been inserted – without public consent, and often in conditions of extreme secrecy – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

A year ago, a conservation group achieved a major legal triumph at the senior court. The justice found that proposals to open the first major coal mine in the UK for 30 years, in northwest England, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine could have no consequence on climate commitments. The new government later cancelled the permission the former government had issued. Today, this victory could be compromised by an offshore tribunal reporting to no one but the entities petitioning it.

Last August, a firm whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in Washington DC was set up to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to commence operations. The public has no clear indication how much this might be. What legal team is representing it against the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The administration makes a decision, the national judiciary validates it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP works for its behalf.

A Sanctions Case

Concurrently that the court on the coal mine dispute was convened, we learned from a government response 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 appears probable that he may employ the tribunal to contest the penalties the UK levied against him following the invasion of Ukraine. He has already initiated proceedings against Luxembourg with similar intent, claiming sixteen billion dollars: an amount representing half nation's yearly income. Part of the legal team on his side? the wife of a former prime minister, married to the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised state funds as guarantee for its financial support package stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations might be preventing the finance Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that these events were not possible. Years ago, a government leader, advocating for the largest and riskiest of all investment pacts, told us: “We’ve signed investment treaty upon trade deal and we have never seen a issue in the past.” An expert on this topic labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that solely developing countries needed to fear these lawsuits. Warnings that “once firms start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with scepticism.

That warning is now a reality. This year, fossil fuel and extraction companies have filed a record number of claims against nations rich and poor, contesting – as in the case of the UK mine – official measures to prevent global warming. Firms have to date won one hundred and fourteen billion dollars via ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP