Welcome, International Oligarchs and Corporations! Please Proceed and Take Legal Action Against the UK for Vast Sums.

How do you understand our democratic process operates? Perhaps something like this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, or the wealthy individuals who own them, have the power to sue nation states for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place away from public scrutiny. In contrast to domestic courts, these tribunals provide no opportunity to appeal or legal review. The general public are unable to file a case to them, nor can our government, including companies based in this country. The door is open only to corporations based overseas.

When a secret court finds that a government measure might diminish the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

This compensation represent not tangible damages but compensation the tribunal officials determine the company might otherwise have made. The government might be compelled to drop the legislation. It is deterred from introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of cases are being initiated, as firms observe each other, and investment funds finance suits for a share of a share of the settlements. The outcome? Sovereignty and democratic governance are now prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the decisions taken by elected bodies is that this provision has been written – absent public approval, and typically amid an atmosphere of extreme secrecy – into bilateral investment treaties.

A Concrete Example: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The justice ruled that plans to dig the first major coal mine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government later cancelled the licence the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal reporting to no one but the companies bringing the case.

During August, a company whose final controllers are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. The public has no idea how much this could amount to. Who is representing it against the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the high court upholds it, then a foreign company contests it through an unaccountable private court, and a member of our parliament represents its behalf.

A Sanctions Challenge

On the same day that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he’ll use the tribunal to fight the penalties the UK levied against him subsequent to the invasion of Ukraine. He has started suing a small nation on these grounds, seeking a colossal sum: an amount representing half state's yearly income. Included in the legal team representing him there? the wife of a former prime minister, married to the former British prime minister.

Trade specialists believe that the EU’s delay in using frozen oligarchs' funds as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments might be preventing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things wouldn’t happen. In 2014, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “The UK has signed trade agreement upon trade deal and there has never been a issue in the past.” A consultant on this matter accused critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms start to realise the power they now possess, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That prediction is now a reality. This year, fossil fuel and mining firms have initiated a record number of suits against nations rich and poor, opposing – like the example of the UK mine – official measures to halt global warming. Companies have to date won $114bn through ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP