Greetings, Overseas Magnates and Firms! Kindly Proceed and Sue the UK for Vast Sums.

How do you perceive our system of government functions? Perhaps something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. The law is maintained by the courts. That's it. Well, that’s how it used to work. No longer.

The Advent of Shadow Courts

In the modern era, foreign corporations, and the billionaires that control them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals composed of business advocates. The cases are conducted in secret. Unlike our courts, these bodies allow no right of appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even companies operating from this country. They are open solely for entities registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These awards represent not tangible damages but money the panel members conclude the company could potentially have made. The government may have to rescind the measure. It will be deterred from passing future laws along the same lines, worried about facing litigation.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being filed, as firms observe each other, and hedge funds finance suits in return for a portion of the awards. The consequence? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it can override domestic law and the rulings enacted by legislatures is that this clause has been written – without democratic mandate, and frequently under an atmosphere of profound opacity – inside international trade agreements.

A Concrete Example: The Whitehaven Coal Mine

Last year, activists won a great victory at the high court. The judge determined that plans to dig the first major coal mine in the UK for three decades, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on climate commitments. The incoming administration later cancelled the permission the Tories had issued. Today, this victory is under threat by an secret arbitration panel answering to only the entities petitioning it.

Last August, a corporate entity whose final controllers reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a tribunal in the US capital was set up to hear it.

The company is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to proceed. The public has no idea how much this might be. What legal team is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The government enacts a policy, the national judiciary upholds it, then a overseas corporation contests it through an secretive arbitration panel, and a sitting MP represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was convened, it was revealed from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case to date, but it seems likely that he’ll use the arbitration process to challenge the sanctions the UK levied against him subsequent to the Russian aggression. He has already initiated proceedings against a small nation with similar intent, seeking $16bn: an amount representing half state's yearly income. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

International law scholars argue that the EU’s procrastination in using frozen Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all these agreements, stated: “The UK has signed trade deal upon trade deal and there has not been a problem in the past.” An adviser on this issue accused critics of “scaremongering … the fact is, ISDS barely touches the UK much”. The general impression appeared to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “once firms start to realise the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by general mockery.

That warning has come to pass. In the current period, fossil fuel and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP