Welcome, Foreign Tycoons and Corporations! Kindly Proceed and Take Legal Action Against the UK for Billions of Pounds.

Can you perceive our political system functions? It could be along the lines of this. We elect MPs. They vote on bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. End of story. Yet, that used to be how it once functioned. Those days are over.

The Advent of Secret Arbitration Panels

Today, international firms, or the wealthy individuals behind them, have the power to sue governments for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases take place in secret. Unlike our courts, these panels allow no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises based in this country. Access is granted only to businesses registered abroad.

Should an arbitration panel finds that a government measure might diminish the corporation’s expected profits, it may order damages of hundreds of millions, running into billions.

These awards are based not on tangible damages but compensation the tribunal officials determine the company might otherwise have made. The government may have to rescind the measure. It is hesitant to enacting future policies in that area, for fear of being sued.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as firms learn from each other, and private equity fund legal actions in return for a cut of the settlements. The result? Democratic sovereignty and democratic governance are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the decisions made by elected bodies is that this stipulation has been inserted – without democratic mandate, and frequently under conditions of extreme secrecy – within international trade agreements.

A Concrete Instance: The UK Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to open the first major coal mine in the UK for 30 years, in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had no impact on our carbon budgets. The incoming administration then withdrew the consent the Tories had approved. Today, this victory is under threat by an secret arbitration panel accountable to only the corporations filing the suit.

During August, a corporate entity whose beneficial owners are based in the tax haven filed a lawsuit versus the UK government. The previous week a dispute settlement body in Washington DC was convened to hear it.

The company is suing the UK for the money it might have made if the mine had been permitted to commence operations. We have little idea how much this could amount to. What legal team is representing it against the UK administration? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The state enacts a policy, the domestic court supports it, then a foreign company challenges it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was convened, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it appears probable that he’ll use the tribunal to contest the restrictions the UK levied against him following the invasion of Ukraine. He has filed a claim against Luxembourg for this reason, seeking a colossal sum: half that nation's yearly budget. Part of the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s procrastination in using frozen oligarchs' funds as security for its financial support package stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations might be preventing the funds Ukraine urgently requires.

Misleading Claims and Escalating Costs

We were assured that these scenarios wouldn’t happen. Previously, a senior politician, championing the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this issue described critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “when companies start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with scepticism.

That warning has come to pass. This year, oil and gas and mining firms have filed a unprecedented number of suits against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to stop climate breakdown. Corporations have to date won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That represents the combined GDP