Greetings, Overseas Magnates and Companies! Kindly Proceed and Take Legal Action Against the UK for Billions of Pounds.

How do you understand our democratic process works? Perhaps similar to this. We elect MPs. They debate and pass bills. Should a majority is secured, the bills become law. The law is upheld by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Advent of Shadow Courts

In the modern era, overseas companies, or the billionaires that control them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of business advocates. The cases are conducted away from public scrutiny. In contrast to domestic courts, these bodies grant no right of appeal or oversight by judges. You or I are barred from bringing a case to them, nor can our government, or even enterprises headquartered in this country. Access is granted solely for businesses based overseas.

When a secret court determines that a law or policy could harm the corporation’s anticipated profits, it may order damages of hundreds of millions, potentially billions.

These sums constitute not real financial harm but funds the arbitrators decide the company would perhaps have made. The state might be compelled to rescind the measure. It becomes discouraged from introducing similar legislation of a similar nature, due to the risk of being sued.

A Mechanism Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as corporations learn from each other, and private equity fund legal actions in return for a cut of the takings. The consequence? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings taken by legislatures is that this stipulation has been written – absent public approval, and typically amid a climate of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Last year, a conservation group won a great victory at the senior court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government subsequently revoked the consent the Tories had granted. Today, this legal outcome is under threat by an secret arbitration panel answering to only the entities filing the suit.

In August, a company whose beneficial owners reside in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in the United States was established to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to go ahead. We have little idea how much this sum represents. Which individual is serving as its counsel in opposition to the British government? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Geoffrey Cox. The state passes a law, the domestic court supports it, then a overseas corporation disputes it through an undemocratic private court, and a member of our parliament works for its behalf.

An Oligarch's Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the penalties the UK imposed on him after the Russian aggression. He has already filed a claim against Luxembourg on these grounds, claiming $16bn: half that nation's annual revenue. Part of the counsel acting for him in that case? the wife of a former prime minister, married to the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

The public was told that these scenarios were not possible. Previously, a senior politician, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this topic labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms begin to understand the influence they now possess, they will turn their attention from the poorer states to the strong ones” were greeted by general mockery.

That warning has now materialised. In the current period, oil and gas and extraction companies have filed a unprecedented number of suits against nations rich and poor, challenging – similar to the UK mine – government attempts to prevent environmental catastrophe. Firms have to date won vast sums via ISDS, of which oil majors have secured the majority. That represents the combined GDP