Hello, Overseas Tycoons and Firms! Kindly Come and Take Legal Action Against the UK for Billions.

Can you reckon our political system functions? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills become law. Statutes are enforced by the courts. That's it. Well, that’s how it used to work. Those days are over.

The Rise of Offshore Courts

Nowadays, overseas companies, and the oligarchs who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals composed of corporate lawyers. These proceedings are conducted away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even companies based in this country. The door is open only to businesses based overseas.

When a secret court determines that a law or policy may compromise the corporation’s projected profits, it can award compensation of vast sums, running into billions.

This compensation represent not real financial harm but funds the panel members decide the company would perhaps have made. The government might be compelled to rescind the measure. It becomes discouraged from enacting future policies along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Unprecedented levels of cases are being initiated, as companies learn from each other, and investment funds bankroll lawsuits for a share of a share of the awards. The result? National sovereignty and democracy are becoming prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the decisions enacted by parliaments is that this clause has been incorporated – without public consent, and frequently under a climate of total confidentiality – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The judge found that plans to dig the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The incoming administration then withdrew the consent the previous administration had granted. Now, this legal outcome is under threat by an secret arbitration panel answering to no one but the entities bringing the case.

During August, a company whose final controllers reside in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. The public has no idea how much this sum represents. What legal team is serving as its counsel challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The government passes a law, the domestic court validates it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case at present, but it seems likely that he may employ the arbitration process to fight the restrictions the UK enacted against him after the war in Ukraine. He has started suing a small nation with similar intent, demanding a colossal sum: half that nation's yearly budget. Included in the legal team on his side? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s hesitation in using frozen oligarchs' funds as security for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, unaccountable authority over elected governments may be obstructing the funds Ukraine urgently requires.

False Assurances and Mounting Risks

We were assured that such things were not possible. In 2014, a government leader, promoting the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” A consultant on this topic labelled campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries had to worry about such legal actions. Warnings that “once firms begin to understand the authority they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That prediction has now materialised. Recently, oil and gas and resource corporations have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the Whitehaven project – official measures to prevent climate breakdown. Corporations have to date won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That is equivalent to the combined GDP