Hello, Overseas Tycoons and Companies! Kindly Proceed and Take Legal Action Against the UK for Vast Sums.

What is your understand our system of government works? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that was how it operated in the past. Not anymore.

The Advent of Shadow Tribunals

Nowadays, overseas companies, and the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at offshore tribunals made up of corporate lawyers. These proceedings take place in secret. Differing from national judiciaries, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even businesses based in this country. They are open solely for corporations operating from foreign soil.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it may order damages of hundreds of millions, potentially billions.

This compensation constitute not real financial harm but money the tribunal officials conclude the company could potentially have made. The government could be forced to abandon its policy. It becomes deterred from introducing similar legislation along the same lines, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and private equity bankroll lawsuits in return for a share of the settlements. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump national legislation and the decisions made by elected bodies is that this stipulation has been incorporated – absent public approval, and frequently under a climate of extreme secrecy – inside international trade agreements.

A Real-World Example: The UK Coal Mine

Twelve months ago, environmental campaigners won a great victory at the senior court. The judge ruled that schemes to open the first deep coalmine in the UK for three decades, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have no impact on climate commitments. The new government then withdrew the consent the previous administration had approved. Now, this legal outcome is under threat by an secret arbitration panel accountable to exclusively the entities filing the suit.

During August, a company whose ultimate owners reside in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the United States was established to consider the case.

The company is litigating against the UK for the revenue it would have generated if the mine had received permission to proceed. The public has little idea how much this might be. Which individual is representing it against the British government? A member of parliament, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the domestic court supports it, then a international entity contests it through an unaccountable offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the panel on the mining lawsuit was established, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he may employ the tribunal to fight the penalties the UK imposed on him subsequent to the war in Ukraine. He has previously initiated proceedings against Luxembourg for this reason, demanding a colossal sum: equivalent to half of government’s yearly income. Included in the lawyers on his side? a prominent lawyer, wife of the former British prime minister.

International law scholars believe that the EU’s procrastination in using frozen state funds as collateral for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

False Assurances and Mounting Threats

Politicians promised that these scenarios could not occur. Years ago, a government leader, advocating for the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and there has never been a case in the past.” An expert on this matter described activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations had to worry about such legal actions. Predictions that “once firms grasp the influence they now possess, they will shift their focus from the poorer states to the developed economies” were met with general mockery.

That threat has come to pass. In the current period, oil and gas and mining firms have filed a historic level of claims against nations across the economic spectrum, contesting – like the example of the Whitehaven project – state efforts to prevent climate breakdown. Corporations have to date won vast sums through ISDS, of which energy giants have obtained eighty-four billion dollars. That equates to the combined GDP