Welcome, International Oligarchs and Companies! Please Come and Litigate Against the UK for Vast Sums.

Can you reckon our political system functions? It could be something like this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills become law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Emergence of Secret Tribunals

Today, overseas companies, or the billionaires behind them, are able to litigate against nation states for the laws they pass, at offshore tribunals staffed by corporate lawyers. The cases take place in secret. Differing from national judiciaries, these panels allow no right of appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

If a tribunal finds that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

This compensation are based not on tangible damages but money the tribunal officials determine the company might otherwise have made. The administration could be forced to rescind the measure. It is discouraged from passing future laws in that area, for fear of facing litigation.

A Process Running Rampant

Historically high figures of cases are being filed, as corporations learn from each other, and hedge funds fund legal actions in exchange for a cut of the takings. The result? Democratic sovereignty and popular rule are now unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede national legislation and the decisions taken by elected bodies is that this provision has been written – without public consent, and often in a climate of profound opacity – within bilateral investment treaties.

A Real-World Instance: The Whitehaven Coalmine

Last year, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer determined that proposals to dig the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have no impact on climate commitments. The Labour government then withdrew the consent the Tories had issued. Now, this success could be compromised by an foreign court accountable to exclusively the corporations petitioning it.

Last August, a company whose ultimate owners are based in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in the United States was established to hear it.

This firm is seeking compensation from the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have no clear indication how much this sum represents. Who is serving as its counsel challenging the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The administration makes a decision, the high court upholds it, then a overseas corporation contests it through an undemocratic offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Challenge

Simultaneously that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the tribunal to fight the penalties the UK enacted against him after the invasion of Ukraine. He has previously initiated proceedings against another European state with similar intent, demanding $16bn: half that state's yearly budget. Among the counsel acting for him in that case? a prominent lawyer, spouse of the former British prime minister.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over elected governments might be preventing the money Ukraine urgently requires.

False Assurances and Mounting Costs

We were assured that these scenarios wouldn’t happen. Years ago, a former prime minister, championing the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic accused activists of “scaremongering … in reality, ISDS does not affect the UK much”. The general impression was crafted to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms grasp the authority they now possess, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That warning has come to pass. In the current period, oil and gas and mining firms have initiated a record number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – state efforts to prevent climate breakdown. Firms have so far won $114bn via ISDS, of which oil majors have obtained $84bn. That equates to the combined GDP