Welcome, International Magnates and Corporations! Kindly Come and Litigate Against the UK for Vast Sums.

Can you reckon our system of government operates? Maybe something like this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. End of story. However, that used to be how it once functioned. Those days are over.

The Emergence of Offshore Arbitration Panels

Nowadays, international firms, or the oligarchs who own them, are able to litigate against nation states for the policies they pass, at private courts staffed by business advocates. These proceedings take place away from public scrutiny. In contrast to domestic courts, these panels grant no opportunity to appeal or judicial review. You or I are unable to file a case to them, just as our government, or even enterprises operating from this country. Access is granted only to corporations operating from foreign soil.

When a secret court finds that a government measure could harm the corporation’s expected profits, it can award damages of hundreds of millions, potentially billions.

These awards represent not actual losses but money the tribunal officials conclude the company could potentially have made. The government may have to rescind the measure. It is hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A Process Running Rampant

Historically high figures of cases are being brought, as companies observe each other, and hedge funds bankroll lawsuits in return for a share of the settlements. The outcome? National sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings made by parliaments is that this provision has been inserted – without public consent, and typically amid a climate of profound opacity – into international trade agreements.

A Specific Case: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the high court. The presiding officer found that plans to excavate the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine could have no impact on our carbon budgets. The Labour government then withdrew the consent the Tories had issued. Now, this success faces being overturned by an secret arbitration panel accountable to only the entities petitioning it.

In August, a corporate entity whose beneficial owners reside in the tax haven filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the money it might have made if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. Which individual is representing it challenging the British government? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the high court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a elected official represents its behalf.

A Sanctions Lawsuit

Concurrently that the panel on the coal mine dispute was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. We know scarce of the case to date, but it seems likely that he’ll use the ISDS mechanism to contest the penalties the UK levied against him following the war in Ukraine. He has initiated proceedings against a small nation on these grounds, seeking $16bn: an amount representing half nation's annual revenue. Among the counsel acting for him in that case? Cherie Blair, married to the previous PM.

International law scholars contend that the EU’s hesitation in using frozen oligarchs' funds as guarantee for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Risks

The public was told that such things were not possible. Previously, a senior politician, advocating for the largest and riskiest of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” An adviser on this topic described activists of “alarmism … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “when companies start to realise the authority they’ve been granted, they will turn their attention from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That prediction is now a reality. Recently, oil and gas and mining firms have filed a record number of cases against nations across the economic spectrum, opposing – similar to the UK mine – official measures to prevent global warming. Corporations have so far won one hundred and fourteen billion dollars through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP