Greetings, Overseas Magnates and Firms! Please Come and Sue the UK for Vast Sums.

What is your perceive our democratic process operates? It could be along the lines of this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Statutes are enforced by the courts. That's it. However, that’s how it once functioned. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, and the wealthy individuals behind them, can sue governments for the regulations they pass, at offshore tribunals composed of corporate lawyers. The cases take place away from public scrutiny. In contrast to domestic courts, these panels allow no opportunity to appeal or legal review. You or I cannot take a case to them, nor can our government, including companies operating from this country. Access is granted exclusively to businesses operating from foreign soil.

Should an arbitration panel determines that a legislative action may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the panel members conclude the company would perhaps have made. The government could be forced to abandon its policy. It will be hesitant to passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being brought, as companies take cues from each other, and investment funds fund legal actions in exchange for a portion of the takings. The result? Democratic sovereignty and democracy are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the choices made by legislatures is that this provision has been written – without democratic mandate, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Specific Example: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners achieved a major legal triumph at the High Court. The justice ruled that proposals to excavate the first deep coalmine in the UK for a generation, in northwest England, had been illegally sanctioned by the previous government, which had agreed to the bizarre claim that the mine would have had zero effect on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Now, this victory faces being overturned by an offshore tribunal answering to only the companies petitioning it.

During August, a firm whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The company is litigating against the UK for the money it might have made if the mine had received permission to proceed. The public has little idea how much this sum represents. Which individual is representing it challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot the MP. The state passes a law, the high court validates it, then a international entity disputes it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the panel on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has already initiated proceedings against a small nation on these grounds, seeking a colossal sum: equivalent to half of nation's annual revenue. Part of the counsel on his side? the wife of a former prime minister, married to the ex-UK leader.

International law scholars believe that the EU’s procrastination in using frozen state funds as security for its financial support package stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Escalating Risks

The public was told that such things wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all investment pacts, declared: “The UK has signed trade deal after trade deal and there has not been a issue in the past.” A consultant on this issue labelled campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That warning has come to pass. In the current period, fossil fuel and resource corporations have filed a historic level of cases against nations rich and poor, contesting – similar to the UK mine – official measures to stop global warming. Corporations have so far won $114bn through ISDS, of which energy giants have been awarded $84bn. That represents the combined GDP