Hello, International Tycoons and Corporations! Please Come and Sue the UK for Billions of Pounds.

How do you reckon our democratic process functions? Maybe something like this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills become law. The law are enforced by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Emergence of Secret Courts

In the modern era, overseas companies, along with the billionaires who own them, have the power to sue elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, including companies based in this country. They are open solely for businesses operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These awards constitute not actual losses but compensation the panel members conclude the company would perhaps have made. The state could be forced to rescind the measure. It is deterred from introducing similar legislation in that area, for fear of being sued.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as firms take cues from each other, and investment funds fund legal actions in exchange for a cut of the awards. The outcome? National sovereignty and democratic governance are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the decisions enacted by legislatures is that this provision has been incorporated – absent public approval, and often in a climate of profound opacity – within bilateral investment treaties.

A Specific Instance: The UK Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice ruled that proposals to dig the first deep coalmine in the UK for three decades, in Cumbria, were found to be illegally sanctioned by the outgoing administration, which had endorsed the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the licence the Tories had approved. Currently, this victory faces being overturned by an secret arbitration panel accountable to only the corporations bringing the case.

Last August, a corporate entity whose final controllers are located in the Cayman Islands filed a lawsuit against the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

The company is seeking compensation from the UK for the money it might have made if the mine had been allowed to proceed. The public has little idea how much this might be. Who is representing it against the UK administration? A member of parliament, and previous senior legal advisor in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the national judiciary supports it, then a overseas corporation disputes it through an unaccountable offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the panel on the coalmine case was established, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it is highly possible that he will utilise the arbitration process to challenge the sanctions the UK levied against him after the invasion of Ukraine. He has initiated proceedings against Luxembourg on these grounds, claiming sixteen billion dollars: half that government’s yearly budget. Part of the counsel representing him there? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in using frozen state funds as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over sovereign states might be preventing the money Ukraine urgently requires.

False Assurances and Growing Threats

We were assured that these scenarios wouldn’t happen. In 2014, a former prime minister, championing the most significant and hazardous of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and there has not been a issue in the past.” An expert on this issue described critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “when companies begin to understand the authority they now possess, they will turn their attention from the poorer states to the developed economies” were met with widespread derision.

That warning has now materialised. Recently, oil and gas and extraction companies have initiated a historic level of cases against nations across the economic spectrum, challenging – as in the case of the Cumbrian coalmine – state efforts to stop global warming. Firms have thus far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP