Welcome, International Tycoons and Firms! Kindly Proceed and Sue the UK for Billions of Pounds.

What is your reckon our democratic process works? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. Statutes are enforced by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Rise of Secret Arbitration Panels

Today, foreign corporations, along with the billionaires behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels composed of corporate lawyers. The cases take place behind closed doors. In contrast to domestic courts, these tribunals provide no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

This compensation constitute not tangible damages but money the panel members decide the company would perhaps have made. The administration might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Running Rampant

Unprecedented levels of disputes are being initiated, as corporations learn from each other, and investment funds bankroll lawsuits in return for a portion of the awards. The result? Democratic sovereignty and democracy are turning into too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can supersede a country's own laws and the choices enacted by elected bodies is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice ruled that plans to dig the first major coal mine in the UK for a generation, in northwest England, were illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The new government subsequently revoked the licence the Tories had approved. Now, this success could be compromised by an foreign court answering to only the corporations bringing the case.

In August, a company whose final controllers reside in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the United States was set up to consider the case.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to go ahead. Citizens have no clear indication how much this might be. Which individual is serving as its counsel against the UK administration? A sitting MP, and ex-law officer in the previous government, the noted patriot the MP. The government passes a law, the national judiciary supports it, then a foreign company challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

A Sanctions Case

Simultaneously that the panel on the coalmine case was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. We know nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to fight the penalties the UK levied against him following the Russian aggression. He has initiated proceedings against Luxembourg on these grounds, demanding a colossal sum: equivalent to half of government’s annual revenue. Included in the legal team on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, unaccountable authority over sovereign states may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Risks

Politicians promised that these events were not possible. In 2014, a senior politician, advocating for the most significant and hazardous of all these agreements, told us: “The UK has signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue labelled critics of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “as corporations grasp the power they now possess, they will shift their focus from the weak nations to the developed economies” were met with widespread derision.

That threat has come to pass. Recently, oil and gas and extraction companies have lodged a record number of claims against nations across the economic spectrum, challenging – similar to the Cumbrian coalmine – official measures to halt climate breakdown. Companies have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP