Hello, International Oligarchs and Corporations! Kindly Come and Take Legal Action Against the UK for Vast Sums.

How do you perceive our democratic process operates? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills become law. The law are enforced by the courts. End of story. Yet, that was how it operated in the past. Not anymore.

The Emergence of Shadow Courts

Today, overseas companies, along with the oligarchs that control them, can sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public cannot take a case to them, nor can our government, or even businesses based in this country. Access is granted solely for businesses registered abroad.

When a secret court determines that a legislative action may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators conclude the company would perhaps have made. The state may have to abandon its policy. It becomes discouraged from enacting future policies in that area, for fear of facing litigation.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being initiated, as companies take cues from each other, and hedge funds fund legal actions for a share of a share of the settlements. The outcome? National sovereignty and democracy are becoming prohibitively expensive.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede domestic law and the rulings made by parliaments is that this provision has been incorporated – without public consent, and typically amid a climate of total confidentiality – within trade treaties.

A Real-World Example: The UK Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The justice determined that plans to open the first new deep coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the Conservative government, which had agreed to the bizarre claim that the mine would have had no impact on our carbon budgets. The Labour government then withdrew the consent the Tories had approved. Today, this legal outcome could be compromised by an foreign court answering to only the entities filing the suit.

During August, a corporate entity whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Recently a arbitration panel in the US capital was convened to hear it.

The claimant is litigating against the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Who is representing it against the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot the MP. The administration enacts a policy, the high court supports it, then a overseas corporation contests it through an unaccountable arbitration panel, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a government response that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. We know nothing of the case to date, but it appears probable that he’ll use the tribunal to fight the restrictions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg with similar intent, claiming $16bn: equivalent to half of nation's annual revenue. Among the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

Legal experts believe that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the secret arbitration panels, under a trade agreement. This remarkable, undemocratic power over elected governments could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Threats

The public was told that these scenarios wouldn’t happen. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, declared: “We’ve signed trade agreement upon trade deal and there has not been a case in the past.” An adviser on this topic labelled critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies grasp the influence bestowed upon them, they will turn their attention from the weak nations to the strong ones” were dismissed with general mockery.

That warning has now materialised. In the current period, fossil fuel and mining firms have filed a record number of claims against nations rich and poor, contesting – similar to the Cumbrian coalmine – government attempts to halt global warming. Companies have thus far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have been awarded the majority. That equates to the combined GDP