Hello, International Magnates and Corporations! Kindly Come and Sue the UK for Billions.

Can you understand our system of government functions? It could be along the lines of this. We elect MPs. They debate and pass bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Advent of Secret Arbitration Panels

Today, international firms, or the billionaires who own them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels staffed by business advocates. These proceedings are held in secret. In contrast to domestic courts, these tribunals grant no right of appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. The door is open solely for businesses based overseas.

If a tribunal rules that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions, running into billions.

This compensation constitute not tangible damages but compensation the arbitrators conclude the company would perhaps have made. The administration could be forced to rescind the measure. It becomes discouraged from introducing similar legislation in that area, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being initiated, as firms learn from each other, and private equity bankroll lawsuits in exchange for a share of the awards. The outcome? Sovereignty and democracy are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the rulings enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under an atmosphere of total confidentiality – within trade treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer determined that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine could have zero effect on national carbon targets. The Labour government then withdrew the permission the former government had granted. Now, this success faces being overturned by an foreign court accountable to exclusively the companies filing the suit.

In August, a firm whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. Last week a arbitration panel in Washington DC was established to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to go ahead. We have no idea how much this could amount to. Who is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Concurrently that the court on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case to date, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK levied against him following the invasion of Ukraine. He has previously filed a claim against another European state with similar intent, claiming $16bn: equivalent to half of nation's yearly budget. Among the legal team on his side? Cherie Blair, spouse of the previous PM.

Trade specialists argue that the EU’s hesitation in utilising seized 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, unaccountable authority over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Mounting Risks

We were assured that these scenarios could not occur. In 2014, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “The UK has signed investment treaty after trade deal and there has not been a problem in the past.” An adviser on this issue labelled critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression appeared to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms grasp the influence bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by scepticism.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have thus far won $114bn via ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP