Welcome, Overseas Oligarchs and Firms! Kindly Come and Take Legal Action Against the UK for Vast Sums.

How do you perceive our democratic process works? Maybe along the lines of this. We elect MPs. They legislate on bills. If a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, along with the billionaires that control them, can sue governments for the laws they pass, at private courts composed of commercial attorneys. Such disputes take place in secret. Differing from national judiciaries, these bodies grant no avenue for appeal or oversight by judges. The general public cannot take a case to them, just as our government, including companies headquartered in this country. Access is granted exclusively to entities registered abroad.

When a secret court finds that a law or policy may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions, potentially billions.

These sums are based not on actual losses but compensation the tribunal officials conclude the company might otherwise have made. The government could be forced to drop the legislation. It will be discouraged from passing future laws of a similar nature, worried about facing litigation.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies observe each other, and investment funds fund legal actions for a share of a share of the takings. The result? National sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the decisions made by legislatures is that this stipulation has been written – absent public approval, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Concrete Instance: The Cumbrian Coalmine

A year ago, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to open the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine could have no consequence on climate commitments. The new government later cancelled the licence the Tories had issued. Currently, this success could be compromised by an foreign court reporting to exclusively the corporations filing the suit.

In August, a firm whose beneficial owners are located in the tax haven initiated proceedings versus the UK government. Recently a tribunal in the United States was set up to adjudicate on it.

The company is litigating against the UK for the money it could have earned if the mine had been allowed to proceed. We have little idea how much this could amount to. Which individual is representing it challenging the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the national judiciary upholds it, then a foreign company disputes it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

Simultaneously that the tribunal on the mining lawsuit was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he’ll use the tribunal to challenge the sanctions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg on these grounds, seeking sixteen billion dollars: half that state's yearly income. Among the counsel on his side? the wife of a former prime minister, wife of the previous PM.

Legal experts contend that the EU’s hesitation in utilising seized state funds as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This extraordinary, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

False Assurances and Escalating Risks

The public was told that these events were not possible. Previously, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this matter labelled critics of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “when companies start to realise the influence they now possess, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. This year, energy and resource corporations have initiated a record number of claims against nations across the economic spectrum, challenging – like the example of the Whitehaven project – state efforts to stop environmental catastrophe. Corporations have thus far won $114bn by using ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP