Hello, Foreign Tycoons and Firms! Kindly Proceed and Sue the UK for Billions of Pounds.

Can you reckon our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Yet, that used to be how it operated in the past. Those days are over.

The Rise of Secret Arbitration Panels

In the modern era, foreign corporations, and the billionaires behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses operating from this country. The door is open solely for entities operating from foreign soil.

Should an arbitration panel determines that a legislative action could harm the corporation’s expected profits, it can award damages of hundreds of millions, potentially billions.

This compensation are based not on actual losses but compensation the panel members determine the company would perhaps have made. The state might be compelled to abandon its policy. It becomes discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A System Running Rampant

Record numbers of disputes are being filed, as companies learn from each other, and investment funds finance suits in exchange for a cut of the settlements. The outcome? National sovereignty and democracy are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override national legislation and the rulings enacted by legislatures is that this provision has been inserted – without public consent, and often in conditions of extreme secrecy – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted 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 licence the former government had granted. Now, this legal outcome could be compromised by an offshore tribunal reporting to no one but the companies bringing the case.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands filed a lawsuit against the UK government. Recently a dispute settlement body in Washington DC was convened to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. We have no idea how much this might be. Which individual is acting on its behalf in opposition to the state? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot the MP. The state enacts a policy, the high court validates it, then a foreign company challenges it through an secretive arbitration panel, and a member of our parliament acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK enacted against him following the invasion of Ukraine. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: an amount representing half government’s yearly income. Included in the lawyers on his side? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars argue that the EU’s hesitation in utilising seized oligarchs' funds as security for its loan to Ukraine arises from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Growing Threats

We were assured that these events were not possible. Years ago, a government leader, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this issue accused campaigners of “scaremongering … the truth is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies begin to understand the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That prediction is now a reality. In the current period, energy and mining firms have filed a unprecedented number of cases against nations rich and poor, contesting – similar to the UK mine – state efforts to halt climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP