Welcome, Overseas Magnates and Companies! Please Proceed and Litigate Against the UK for Vast Sums.

Can you perceive our political system functions? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that used to be how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

Nowadays, international firms, and the billionaires who own them, are able to litigate against nation states for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings are held in secret. In contrast to domestic courts, these tribunals provide no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including companies based in this country. The door is open only to businesses based overseas.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

These awards are based not on real financial harm but compensation the tribunal officials decide the company might otherwise have made. The administration could be forced to rescind the measure. It will be hesitant to introducing similar legislation of a similar nature, worried about being sued.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being filed, as corporations learn from each other, and hedge funds fund legal actions for a share of a share of the takings. The result? Sovereignty and democratic governance are becoming too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions taken by legislatures is that this stipulation has been inserted – absent public approval, and frequently under a climate of total confidentiality – within bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

A year ago, environmental campaigners won a great victory at the High Court. The justice determined that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the Conservative government, which had endorsed the questionable argument that the mine would have no consequence on climate commitments. The new government subsequently revoked the licence the Tories had issued. Now, this victory could be compromised by an offshore tribunal accountable to no one but the corporations filing the suit.

During August, a firm whose beneficial owners are located in the offshore financial centre lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been permitted to go ahead. The public has little idea how much this sum represents. Who is acting on its behalf challenging the state? A sitting MP, and ex-law officer in the outgoing administration, that great patriot the MP. The administration enacts a policy, the high court upholds it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he will utilise the tribunal to fight the penalties the UK enacted against him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, claiming $16bn: an amount representing half state's yearly budget. Part of the legal team representing him there? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in leveraging immobilised oligarchs' funds as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Growing Costs

Politicians promised that such things wouldn’t happen. Previously, a government leader, promoting the largest and riskiest of all investment pacts, told us: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” An expert on this matter accused critics of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about these lawsuits. Predictions that “once firms begin to understand the power they now possess, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning has now materialised. Recently, fossil fuel and resource corporations have initiated a record number of suits against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – government attempts to halt environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That represents the combined GDP