Hello, International Tycoons and Firms! Kindly Come and Litigate Against the UK for Vast Sums.

How do you understand our democratic process operates? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is maintained by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Emergence of Shadow Courts

In the modern era, overseas companies, or the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at private courts staffed by business advocates. The cases are conducted behind closed doors. Differing from national judiciaries, these tribunals allow no avenue for appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. Access is granted exclusively to entities operating from foreign soil.

If a tribunal determines that a legislative action could harm the corporation’s anticipated profits, it can award damages of vast sums, potentially billions.

This compensation represent not actual losses but funds the panel members determine the company could potentially have made. The state could be forced to rescind the measure. It is deterred from introducing similar legislation in that area, due to the risk of facing litigation.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in exchange for a cut of the awards. The outcome? National sovereignty and democracy are now too costly.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can trump national legislation and the choices enacted by legislatures is that this stipulation has been incorporated – without public consent, and frequently under an atmosphere of total confidentiality – within bilateral investment treaties.

A Concrete Example: The Whitehaven Coalmine

Last year, activists won a great victory at the high court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the previous government, which had endorsed the questionable argument that the mine could have no impact on our carbon budgets. The incoming administration then withdrew the consent the former government had granted. Currently, this success faces being overturned by an foreign court reporting to only the corporations filing the suit.

In August, a firm whose beneficial owners are based in the Cayman Islands lodged a claim against the UK government. Recently a arbitration panel in the United States was established to adjudicate on 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 little idea how much this could amount to. Who is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state enacts a policy, the high court validates it, then a international entity contests it through an secretive private court, and a sitting MP represents its behalf.

A Sanctions Case

Concurrently 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 Russian oligarch, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he will utilise the arbitration process to fight the restrictions the UK enacted against him after the invasion of Ukraine. He has already initiated proceedings against another European state for this reason, seeking $16bn: half that state's yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, undemocratic power over democratic administrations may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

The public was told that these events were not possible. In 2014, a former prime minister, advocating for the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal after trade deal and we have never seen a issue in the past.” A consultant on this topic described activists of “exaggeration … the fact is, ISDS has little impact on the UK much”. The general impression seemed to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms grasp the authority bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were met with scepticism.

That prediction has come to pass. In the current period, energy and resource corporations have filed a historic level of claims against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – government attempts to halt environmental catastrophe. Companies have to date won $114bn via ISDS, of which oil majors have secured the majority. That is equivalent to the combined GDP