Greetings, Foreign Oligarchs and Corporations! Kindly Come and Litigate Against the UK for Billions of Pounds.

How do you perceive our system of government operates? Perhaps similar to this. Citizens choose MPs. They legislate on bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. End of story. However, that was how it operated in the past. Not anymore.

The Rise of Secret Courts

Today, overseas companies, and the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at private courts composed of commercial attorneys. The cases are held behind closed doors. In contrast to domestic courts, these panels allow no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, including enterprises headquartered in this country. The door is open exclusively to businesses operating from foreign soil.

If a tribunal finds that a government measure could harm the corporation’s projected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These awards represent not tangible damages but funds the panel members determine the company might otherwise have made. The state could be forced to drop the legislation. It is discouraged from passing future laws along the same lines, for fear of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being filed, as firms observe each other, and investment funds bankroll lawsuits for a share of a share of the settlements. The result? National sovereignty and popular rule are now unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override a country's own laws and the rulings made by elected bodies is that this stipulation has been written – without democratic mandate, and typically amid conditions of total confidentiality – within trade treaties.

A Real-World Case: The Whitehaven Coal Mine

Twelve months ago, environmental campaigners won a great victory at the high court. The judge determined that proposals to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had accepted the questionable argument that the mine would have had no impact on climate commitments. The Labour government later cancelled the permission the previous administration had granted. Now, this victory could be compromised by an secret arbitration panel answering to only the companies bringing the case.

Last August, a firm whose beneficial owners are located in the Cayman Islands lodged a claim versus the UK government. Recently a dispute settlement body in the United States was convened to hear it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had received permission to commence operations. Citizens have no clear indication how much this sum represents. Who is representing it in opposition to the state? A member of parliament, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

The Russian Challenge

On the same day that the court on the coalmine case was convened, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it appears probable that he’ll use the arbitration process to challenge the restrictions the UK imposed on him after the war in Ukraine. He has started suing Luxembourg on these grounds, demanding sixteen billion dollars: an amount representing half nation's yearly budget. Part of the lawyers representing him there? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that such things were not possible. Previously, a government leader, championing the largest and riskiest of all such treaties, declared: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic accused campaigners of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “as corporations grasp the authority bestowed upon them, they will shift their focus from the vulnerable countries to the developed economies” were met with widespread derision.

That warning has come to pass. In the current period, oil and gas and mining firms have lodged a record number of cases against nations rich and poor, challenging – like the example of the Whitehaven project – state efforts to halt climate breakdown. Companies have to date won vast sums via ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP