Greetings, Overseas Tycoons and Companies! Kindly Proceed and Litigate Against the UK for Billions.

What is your reckon our political system functions? It could be along the lines of this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. The law is maintained by the courts. Simple as that. Well, that used to be how it operated in the past. Those days are over.

The Advent of Secret Arbitration Panels

In the modern era, overseas companies, and the oligarchs who own them, have the power to sue governments for the regulations they pass, at private courts made up of commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, just as our government, including businesses based in this country. They are open solely for businesses based overseas.

When a secret court determines that a legislative action may compromise the corporation’s projected profits, it can award damages of vast sums, potentially billions.

These awards constitute not actual losses but money the arbitrators determine the company might otherwise have made. The state may have to abandon its policy. It is hesitant to enacting future policies in that area, worried about being sued.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as companies learn from each other, and hedge funds finance suits for a share of a portion of the settlements. The outcome? Democratic sovereignty and popular rule are now unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the decisions taken by parliaments is that this clause has been inserted – without public consent, and typically amid conditions of total confidentiality – within bilateral investment treaties.

A Real-World Case: The UK Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer found that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the previous government, which had agreed to the extraordinary assertion that the mine would have no consequence on climate commitments. The incoming administration subsequently revoked the licence the previous administration had issued. Today, this victory could be compromised by an foreign court answering to only the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are located in the tax haven initiated proceedings against the UK government. Last week a dispute settlement body in the US capital was established to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel challenging the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The state makes a decision, the high court supports it, then a overseas corporation challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

A Sanctions Case

Simultaneously that the court on the coalmine case was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, a sanctioned individual. We know scarce of the case at present, but it appears probable that he will utilise the ISDS mechanism to contest the restrictions the UK enacted against him after the war in Ukraine. He has already initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: equivalent to half of government’s yearly budget. Part of the lawyers on his side? the wife of a former prime minister, wife of the previous PM.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

The public was told that these events could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An expert on this topic described critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “once firms grasp the authority bestowed upon them, they will turn their attention from the weak nations to the strong ones” were met with general mockery.

That warning has come to pass. This year, fossil fuel and resource corporations have filed a record number of cases against nations both wealthy and developing, challenging – similar to the UK mine – official measures to prevent climate breakdown. Firms have thus far won vast sums by using ISDS, of which oil majors have secured $84bn. That equates to the combined GDP