Hello, Overseas Oligarchs and Firms! Kindly Come and Litigate Against the UK for Billions.

What is your perceive our democratic process operates? Maybe along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Legislation is upheld by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Secret Courts

Nowadays, overseas companies, or the oligarchs that control them, can sue nation states for the regulations they pass, at private courts composed of business advocates. These proceedings are conducted in secret. Unlike our courts, these tribunals allow no avenue for appeal or oversight by judges. You or I are barred from bringing a case to them, just as our government, including businesses based in this country. They are open exclusively to entities operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions, even billions.

These awards constitute not tangible damages but funds the arbitrators determine the company could potentially have made. The administration might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Record numbers of disputes are being brought, as companies learn from each other, and private equity bankroll lawsuits in return for a cut of the settlements. The result? National sovereignty and popular rule are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices enacted by legislatures is that this stipulation has been written – without democratic mandate, and often in an atmosphere of profound opacity – within bilateral investment treaties.

A Real-World Case: The Cumbrian Coalmine

A year ago, a conservation group secured a significant win at the high court. The presiding officer found that schemes to dig the first new deep coal mine in the UK for a generation, in northwest England, were found to be illegally sanctioned by the outgoing administration, which had agreed to the questionable argument that the mine could have zero effect on national carbon targets. The Labour government then withdrew the permission the former government had granted. Now, this success is under threat by an offshore tribunal answering to no one but the companies petitioning it.

During August, a company whose final controllers are based in the Cayman Islands lodged a claim versus the UK government. Last week a tribunal in the United States was convened to adjudicate on it.

The company is suing the UK for the revenue it could have earned if the mine had been allowed to go ahead. The public has no clear indication how much this sum represents. What legal team is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary upholds it, then a overseas corporation challenges it through an secretive offshore tribunal, and a sitting MP acts on its behalf.

The Russian Lawsuit

On the same day that the panel on the coal mine dispute was established, we learned from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. Details are scarce of the case to date, but it seems likely that he will utilise the tribunal to contest the restrictions the UK imposed on him following the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the lawyers on his side? Cherie Blair, spouse of the previous PM.

Legal experts believe that the EU’s delay in leveraging immobilised state funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that such things could not occur. Previously, a former prime minister, advocating for the most significant and hazardous of all such treaties, declared: “The UK has signed trade deal after trade deal and there has never been a case in the past.” A consultant on this issue labelled critics of “alarmism … the truth is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations should be concerned by these lawsuits. Warnings that “once firms grasp the authority they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. This year, fossil fuel and resource corporations have lodged a record number of suits against nations rich and poor, challenging – as in the case of the UK mine – state efforts to prevent climate breakdown. Corporations have thus far won $114bn by using ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP