Welcome, Foreign Magnates and Companies! Kindly Proceed and Litigate Against the UK for Vast Sums.

How do you perceive our system of government functions? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. Yet, that was how it once functioned. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, or the oligarchs behind them, are able to litigate against governments for the regulations they pass, at secret arbitration panels made up of business advocates. The cases take place behind closed doors. Unlike our courts, these bodies grant no opportunity to appeal or legal review. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. They are open only to businesses based overseas.

Should an arbitration panel rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation constitute not real financial harm but money the panel members decide the company might otherwise have made. The government may have to rescind the measure. It is deterred from enacting future policies of a similar nature, due to the risk of being sued.

A System Growing Exponentially

Record numbers of cases are being filed, as companies learn from each other, and private equity finance suits in return for a portion of the awards. The result? Sovereignty and democratic governance are turning into prohibitively expensive.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the rulings taken by legislatures is that this clause has been inserted – without democratic mandate, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, a conservation group achieved a major legal triumph at the high court. The presiding officer ruled that proposals to excavate the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine would have had no consequence on climate commitments. The incoming administration later cancelled the permission the Tories had granted. Currently, this victory is under threat by an foreign court reporting to exclusively the companies petitioning it.

During August, a company whose beneficial owners reside in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in Washington DC was convened to consider the case.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. Citizens have no idea how much this might be. Who is representing it against the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a foreign company challenges it through an unaccountable arbitration panel, and a elected official represents its behalf.

The Russian Lawsuit

On the same day that the tribunal on the coal mine dispute was convened, 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 little of the case at present, but it seems likely that he will utilise the tribunal to fight the penalties the UK levied against him after the invasion of Ukraine. He has previously initiated proceedings against Luxembourg on these grounds, seeking a colossal sum: equivalent to half of nation's yearly budget. Included in the counsel acting for him in that case? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine critically depends on.

False Assurances and Escalating Threats

The public was told that such things could not occur. Years ago, a senior politician, promoting the largest and riskiest of all these agreements, told us: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this issue accused campaigners of “scaremongering … in reality, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations start to realise the influence they’ve been granted, they will turn their attention from the poorer states to the wealthy nations” were dismissed with widespread derision.

That prediction is now a reality. Recently, fossil fuel and extraction companies have lodged a unprecedented number of cases against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to prevent global warming. Corporations have so far won vast sums through ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP