Greetings, Overseas Magnates and Firms! Please Come and Take Legal Action Against the UK for Billions.

What is your understand our democratic process functions? It could be something like this. Citizens choose MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. Legislation is maintained by the courts. End of story. However, that was how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Today, overseas companies, and the wealthy individuals who own them, have the power to sue governments for the policies they pass, at secret arbitration panels composed of commercial attorneys. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, nor can our government, or even businesses based in this country. They are open solely for businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but funds the arbitrators conclude the company would perhaps have made. The state may have to rescind the measure. It is deterred from enacting future policies in that area, worried about facing litigation.

A Process Growing Exponentially

Record numbers of disputes are being filed, as corporations observe each other, and private equity fund legal actions for a share of a cut of the awards. The result? Sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the choices made by elected bodies is that this provision has been inserted – without public consent, and often in an atmosphere of total confidentiality – into international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

Last year, activists achieved a major legal triumph at the High Court. The judge ruled that schemes to dig the first major coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the outgoing administration, which had agreed to the bizarre claim that the mine would have had zero effect on climate commitments. The incoming administration then withdrew the consent the previous administration had granted. Today, this victory is under threat by an foreign court accountable to only the corporations bringing the case.

During August, a firm whose ultimate owners are based in the tax haven lodged a claim against the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The claimant is litigating against the UK for the revenue it could have earned if the mine had been permitted to go ahead. We have no clear indication how much this sum represents. What legal team is serving as its counsel against the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state passes a law, the national judiciary supports it, then a overseas corporation challenges it through an secretive offshore tribunal, and a elected official works for its behalf.

The Russian Challenge

On the same day that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case so far, but it appears probable that he may employ the ISDS mechanism to fight the sanctions the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, demanding a colossal sum: an amount representing half nation's yearly income. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists argue that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine critically depends on.

Empty Promises and Mounting Risks

Politicians promised that these scenarios were not possible. In 2014, a government leader, championing the most significant and hazardous of all such treaties, stated: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An expert on this issue labelled critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear such legal actions. Cautionary notes that “once firms start to realise the influence they now possess, they will shift their focus from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has now materialised. Recently, oil and gas and extraction companies have initiated a unprecedented number of claims against nations rich and poor, contesting – similar to the Whitehaven project – official measures to halt climate breakdown. Companies have thus far won $114bn via ISDS, of which oil majors have secured $84bn. That equates to the combined GDP