Welcome, International Magnates and Corporations! Kindly Come and Litigate Against the UK for Billions of Pounds.

What is your understand our democratic process functions? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. If a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. Yet, that was how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, overseas companies, along with the oligarchs that control them, are able to litigate against nation states for the policies they pass, at offshore tribunals composed of corporate lawyers. The cases are held in secret. Differing from national judiciaries, these bodies allow no right of appeal or legal review. You or I cannot take a case to them, just as our government, or even companies based in this country. They are open exclusively to businesses based overseas.

When a secret court rules that a law or policy may compromise the corporation’s expected profits, it has the power to grant compensation of vast sums, even billions.

These sums represent not real financial harm but money the tribunal officials conclude the company could potentially have made. The government may have to abandon its policy. It is deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A System Running Rampant

Unprecedented levels of legal actions are being initiated, as corporations observe each other, and hedge funds bankroll lawsuits in return for a portion of the awards. The outcome? National sovereignty and popular rule are now too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices made by parliaments is that this provision has been written – without democratic mandate, and typically amid a climate of profound opacity – within international trade agreements.

A Concrete Case: The UK Coal Mine

A year ago, activists won a great victory at the high court. The justice found that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, had been wrongly permitted by the previous government, which had endorsed the bizarre claim that the mine would have no consequence on our carbon budgets. The new government then withdrew the permission the former government had issued. Currently, this success is under threat by an foreign court reporting to exclusively the entities bringing the case.

In August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in Washington DC was established to consider the case.

The claimant is litigating against the UK for the money it might have made if the mine had been permitted to go ahead. We have no clear indication how much this could amount to. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the high court upholds it, then a foreign company disputes it through an secretive private court, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coal mine dispute was convened, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. The public knows scarce of the case at present, but it seems likely that he will utilise the arbitration process to fight the penalties the UK levied against him following the Russian aggression. He has filed a claim against a small nation on these grounds, demanding a colossal sum: half that government’s annual revenue. Included in the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This remarkable, secretive influence over elected governments might be preventing the money Ukraine critically depends on.

Misleading Claims and Mounting Threats

Politicians promised that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has not been a problem 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 appeared to be that exclusively weaker states needed to fear ISDS claims. Predictions that “once firms start to realise the authority they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by scepticism.

That warning is now a reality. Recently, energy and mining firms have filed a record number of claims against nations rich and poor, challenging – as in the case of the Whitehaven project – official measures to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That equates to the combined GDP