Hello, International Oligarchs and Firms! Please Come and Litigate Against the UK for Vast Sums.

What is your understand our democratic process works? It could be similar to this. The public votes for MPs. They vote on bills. Should a majority is obtained, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that’s how it used to work. No longer.

The Advent of Offshore Courts

Nowadays, foreign corporations, along with the billionaires behind them, can sue elected administrations for the regulations they pass, at private courts composed of commercial attorneys. Such disputes are held away from public scrutiny. Differing from national judiciaries, these tribunals provide no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open exclusively to businesses based overseas.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it can award damages of vast sums, running into billions.

These sums represent not tangible damages but funds the arbitrators conclude the company could potentially have made. The administration may have to drop the legislation. It is discouraged from enacting future policies along the same lines, for fear of being sued.

A Process Growing Exponentially

Record numbers of legal actions are being brought, as firms learn from each other, and hedge funds bankroll lawsuits in exchange for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are turning into too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump domestic law and the decisions taken by parliaments is that this provision has been inserted – without public consent, and often in conditions of total confidentiality – into trade treaties.

A Real-World Example: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The judge ruled that plans to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had agreed to the bizarre claim that the mine would have had no consequence on climate commitments. The new government later cancelled the consent the previous administration had granted. Today, this legal outcome is under threat by an foreign court reporting to no one but the corporations bringing the case.

During August, a company whose beneficial owners reside in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was convened to consider the case.

The claimant is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. Citizens have little idea how much this could amount to. Who is acting on its behalf challenging the British government? A member of parliament, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court validates it, then a foreign company challenges it through an unaccountable private court, and a sitting MP works for its behalf.

A Sanctions Challenge

Concurrently that the court on the coalmine case was established, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case so far, but it is highly possible that he may employ the tribunal to contest the penalties the UK levied against him subsequent to the war in Ukraine. He has previously initiated proceedings against another European state for this reason, demanding sixteen billion dollars: an amount representing half state's yearly budget. Among the legal team representing him there? the wife of a former prime minister, wife of the ex-UK leader.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as collateral for its financial support package is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the money Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that these events could not occur. Previously, a former prime minister, championing the biggest and most dangerous of all investment pacts, told us: “Britain has agreed to trade deal upon trade deal and there has not been a case in the past.” A consultant on this matter described critics of “scaremongering … in reality, ISDS has little impact on the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the vulnerable countries to the developed economies” were met with widespread derision.

That prediction has now materialised. Recently, energy and mining firms have initiated a unprecedented number of cases against nations rich and poor, contesting – similar to the Cumbrian coalmine – state efforts to halt climate breakdown. Firms have to date won $114bn through ISDS, of which fossil fuel companies have obtained the majority. That equates to the combined GDP