Hello, Foreign Oligarchs and Firms! Please Proceed and Sue the UK for Vast Sums.

What is your reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They vote on bills. If a majority is obtained, the bills pass into law. Statutes is maintained by the courts. Simple as that. Well, that’s how it used to work. Those days are over.

The Advent of Offshore Courts

Today, overseas companies, and the wealthy individuals behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place away from public scrutiny. Unlike our courts, these panels allow no opportunity to appeal or judicial review. The general public cannot take a case to them, nor can our government, or even enterprises headquartered in this country. They are open exclusively to businesses registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, running into billions.

These sums represent not actual losses but compensation the panel members conclude the company could potentially have made. The state could be forced to drop the legislation. It will be hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Historically high figures of disputes are being initiated, as companies take cues from each other, and private equity fund legal actions in return for a cut of the awards. The consequence? National sovereignty and democratic governance are becoming prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings made by parliaments is that this stipulation has been inserted – without democratic mandate, and typically amid a climate of extreme secrecy – inside bilateral investment treaties.

A Concrete Example: The Cumbrian Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer found that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The new government subsequently revoked the permission the Tories had granted. Currently, this success is under threat by an offshore tribunal accountable to exclusively the companies petitioning it.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre filed a lawsuit against the UK government. The previous week a tribunal in the US capital was set up to consider the case.

The claimant is litigating against the UK for the profits it could have earned if the mine had been allowed to commence operations. The public has no clear indication how much this could amount to. Which individual is representing it against the state? A member of parliament, and ex-law officer in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a international entity challenges it through an unaccountable private court, and a elected official works for its behalf.

A Sanctions Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK enacted against him following the war in Ukraine. He has started suing another European state for this reason, demanding sixteen billion dollars: equivalent to half of government’s yearly income. Part of the counsel representing him there? a prominent lawyer, spouse of the previous PM.

Legal experts contend that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments may be obstructing the finance Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that such things were not possible. Years ago, a senior politician, advocating for the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty upon trade deal and there has never been a problem in the past.” An adviser on this topic accused campaigners of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by these lawsuits. Predictions that “when companies grasp the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. This year, energy and extraction companies have initiated a historic level of cases against nations both wealthy and developing, contesting – as in the case of the UK mine – government attempts to prevent environmental catastrophe. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP