Hello, Foreign Magnates and Corporations! Please Come and Litigate Against the UK for Billions.

What is your reckon our political system functions? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. The law are enforced by the courts. End of story. However, that used to be how it used to work. Those days are over.

The Advent of Offshore Courts

Today, international firms, or the oligarchs who own them, are able to litigate against governments for the policies they pass, at private courts made up of commercial attorneys. Such disputes are conducted away from public scrutiny. Unlike our courts, these bodies provide no right of appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even businesses based in this country. They are open only to corporations registered abroad.

If a tribunal determines that a government measure might diminish the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not tangible damages but funds the tribunal officials decide the company would perhaps have made. The state might be compelled to rescind the measure. It becomes hesitant to introducing similar legislation in that area, worried about being sued.

A System Running Rampant

Record numbers of disputes are being brought, as firms take cues from each other, and investment funds fund legal actions in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democracy are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the decisions made by parliaments is that this provision has been written – without democratic mandate, and often in a climate of extreme secrecy – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

A year ago, environmental campaigners secured a significant win at the High Court. The justice ruled that schemes to open the first major coal mine in the UK for three decades, in northwest England, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no consequence on climate commitments. The new government then withdrew the permission the Tories had approved. Today, this legal outcome is under threat by an secret arbitration panel answering to no one but the corporations petitioning it.

In August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim challenging the UK government. The previous week a dispute settlement body in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have little idea how much this might be. Which individual is serving as its counsel against the state? An elected representative, and ex-law officer in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a overseas corporation contests it through an secretive offshore tribunal, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the panel on the coalmine case 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 to date, but it seems likely that he’ll use the arbitration process to contest the penalties the UK levied against him subsequent to the Russian aggression. He has already started suing another European state with similar intent, claiming sixteen billion dollars: half that nation's yearly income. Part of the legal team acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists argue that the EU’s delay in using frozen oligarchs' funds as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over democratic administrations might be preventing the finance Ukraine desperately needs.

Misleading Claims and Growing Threats

Politicians promised that these events could not occur. Years ago, a former prime minister, advocating for the largest and riskiest of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” An expert on this matter labelled critics of “alarmism … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “as corporations grasp the influence they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with general mockery.

That warning has come to pass. Recently, oil and gas and mining firms have lodged a historic level of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – government attempts to prevent climate breakdown. Firms have so far won vast sums via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP