Hello, Overseas Tycoons and Firms! Kindly Proceed and Litigate Against the UK for Vast Sums.

What is your perceive our system of government operates? Perhaps along the lines of this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Legislation is upheld by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Rise of Shadow Courts

Nowadays, overseas companies, along with the oligarchs behind them, are able to litigate against elected administrations for the regulations they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these panels provide no avenue for appeal or judicial review. You or I are barred from bringing a case to them, just as our government, including businesses based in this country. They are open only to businesses operating from foreign soil.

Should an arbitration panel rules that a law or policy may compromise the corporation’s projected profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These sums are based not on actual losses but money the tribunal officials conclude the company would perhaps have made. The state may have to drop the legislation. It becomes hesitant to introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A System Running Rampant

Unprecedented levels of disputes are being initiated, as corporations take cues from each other, and private equity fund legal actions in exchange for a cut of the takings. The result? Democratic sovereignty and democracy are turning into too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override domestic law and the decisions taken by legislatures is that this provision has been inserted – absent public approval, and often in conditions of total confidentiality – within bilateral investment treaties.

A Specific Example: The UK Coal Mine

A year ago, activists achieved a major legal triumph at the senior court. The justice determined that plans to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The incoming administration subsequently revoked the permission the previous administration had issued. Now, this success faces being overturned by an offshore tribunal answering to no one but the companies bringing the case.

During August, a company whose beneficial owners are located in the offshore financial centre filed a lawsuit against the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. We have no idea how much this might be. Which individual is representing it in opposition to the British government? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

Concurrently that the court on the mining lawsuit was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it is highly possible that he may employ the arbitration process to contest the restrictions the UK imposed on him following the war in Ukraine. He has already started suing another European state with similar intent, demanding a colossal sum: an amount representing half state's yearly budget. Included in the lawyers acting for him in that case? Cherie Blair, spouse of the former British prime minister.

Trade specialists contend that the EU’s hesitation in leveraging immobilised state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, undemocratic power over democratic administrations may be obstructing the finance Ukraine desperately needs.

False Assurances and Mounting Costs

The public was told that such things were not possible. Previously, a former prime minister, championing the most significant and hazardous of all these agreements, declared: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An adviser on this topic described critics of “alarmism … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that solely developing countries should be concerned by such legal actions. Warnings that “when companies grasp the influence they now possess, they will shift their focus from the weak nations to the developed economies” were dismissed with scepticism.

That warning is now a reality. This year, fossil fuel and resource corporations have filed a record number of cases against nations both wealthy and developing, contesting – like the example of the UK mine – state efforts to stop climate breakdown. Companies have thus far won vast sums via ISDS, of which energy giants have been awarded the majority. That represents the combined GDP