Hello, Foreign Oligarchs and Corporations! Please Proceed and Sue the UK for Billions.

What is your understand our democratic process functions? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills pass into law. Legislation is upheld by the courts. Simple as that. Yet, that was how it operated in the past. Those days are over.

The Rise of Offshore Courts

Nowadays, international firms, and the billionaires behind them, have the power to sue governments for the laws they pass, at secret arbitration panels staffed by business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these panels provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises headquartered in this country. They are open solely for corporations operating from foreign soil.

Should an arbitration panel finds that a law or policy could harm the corporation’s anticipated profits, it may order financial penalties of vast sums, running into billions.

These sums represent not tangible damages but compensation the tribunal officials conclude the company might otherwise have made. The state may have to abandon its policy. It becomes deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Historically high figures of legal actions are being initiated, as firms observe each other, and investment funds fund legal actions in exchange for a portion of the takings. The result? National sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it can override a country's own laws and the rulings enacted by legislatures is that this provision has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Real-World Example: The UK Coal Mine

Last year, environmental campaigners secured a significant win at the senior court. The judge found that plans to excavate the first new deep coal mine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The Labour government later cancelled the consent the former government had approved. Currently, this victory is under threat by an foreign court reporting to only the corporations bringing the case.

During August, a corporate entity whose beneficial owners are based in the offshore financial centre filed a lawsuit challenging the UK government. Last week a arbitration panel in the US capital was established to hear it.

The claimant is suing the UK for the money it would have generated if the mine had been allowed to go ahead. We have little idea how much this might be. Which individual is representing it in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity contests it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. The public knows little of the case at present, but it appears probable that he will utilise the arbitration process to contest the penalties the UK enacted against him following the war in Ukraine. He has filed a claim against Luxembourg on these grounds, seeking a colossal sum: half that government’s yearly budget. Part of the counsel on his side? a prominent lawyer, spouse of the ex-UK leader.

Legal experts contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, undemocratic power over elected governments could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

We were assured that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed trade deal upon trade deal and there has not been a case in the past.” An expert on this topic accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about such legal actions. Cautionary notes that “as corporations grasp the influence they’ve been granted, they will shift their focus from the weak nations to the wealthy nations” were greeted by widespread derision.

That threat is now a reality. This year, oil and gas and mining firms have filed a record number of claims against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – official measures to prevent environmental catastrophe. Companies have to date won vast sums via ISDS, of which fossil fuel companies have obtained $84bn. That is equivalent to the combined GDP