Hello, International Tycoons and Firms! Please Come and Litigate Against the UK for Vast Sums.

What is your perceive our political system functions? It could be along the lines of this. The public votes for MPs. They vote on bills. If a majority is secured, the bills become law. The law is upheld by the courts. End of story. However, that’s how it once functioned. Not anymore.

The Rise of Secret Tribunals

Today, foreign corporations, or the billionaires behind them, are able to litigate against nation states for the laws they pass, at secret arbitration panels composed of commercial attorneys. These proceedings are conducted behind closed doors. Differing from national judiciaries, these tribunals grant no avenue for appeal or legal review. You or I are unable to file a case to them, and neither can our government, including companies operating from this country. They are open only to entities registered abroad.

If a tribunal finds that a law or policy may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions, running into billions.

These awards represent not actual losses but money the arbitrators conclude the company could potentially have made. The government may have to rescind the measure. It becomes hesitant to introducing similar legislation in that area, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of legal actions are being brought, as companies observe each other, and investment funds bankroll lawsuits in return for a cut of the takings. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the choices enacted by elected bodies is that this provision has been written – without democratic mandate, and frequently under conditions of total confidentiality – within bilateral investment treaties.

A Concrete Instance: The UK Coalmine

Last year, activists achieved a major legal triumph at the High Court. The presiding officer ruled that schemes to dig the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the extraordinary assertion that the mine could have no consequence on our carbon budgets. The Labour government subsequently revoked the permission the Tories had approved. Today, this success is under threat by an foreign court reporting to no one but the corporations filing the suit.

During August, a corporate entity whose ultimate owners are located in the offshore financial centre lodged a claim against the UK government. Last week a dispute settlement body in Washington DC was convened to hear it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to proceed. We have no clear indication how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and ex-law officer in the Conservative government, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court upholds it, then a overseas corporation contests it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

A Sanctions Challenge

On the same day that the court on the coal mine dispute was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. We know scarce of the case so far, but it appears probable that he’ll use the tribunal to fight the penalties the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against a small nation on these grounds, seeking a colossal sum: half that nation's annual revenue. Included in the lawyers on his side? Cherie Blair, married to the previous PM.

Legal experts believe that the EU’s delay in using frozen state funds as collateral for its aid for Ukraine is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the money Ukraine desperately needs.

Empty Promises and Growing Risks

The public was told that these events wouldn’t happen. Previously, a government leader, promoting the most significant and hazardous of all such treaties, told us: “Britain has agreed to trade agreement upon trade deal and we have never seen a issue in the past.” A consultant on this matter accused activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries needed to fear such legal actions. Predictions that “when companies start to realise the power bestowed upon them, they will turn their attention from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That warning has come to pass. In the current period, oil and gas and resource corporations have filed a record number of cases against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to stop global warming. Firms have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That represents the combined GDP