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

How do you understand our political system functions? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills are enacted as law. Statutes is maintained by the courts. End of story. However, that’s how it operated in the past. Not anymore.

The Advent of Secret Arbitration Panels

Nowadays, international firms, along with the oligarchs behind them, can sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. These proceedings take place in secret. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. The general public are unable to file a case to them, nor can our government, including businesses operating from this country. Access is granted solely for corporations registered abroad.

When a secret court finds that a legislative action may compromise the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but money the tribunal officials decide the company could potentially have made. The government might be compelled to drop the legislation. It becomes hesitant to enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Record numbers of cases are being filed, as companies learn from each other, and investment funds finance suits in exchange for a cut of the awards. The consequence? Democratic sovereignty and democratic governance are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the decisions enacted by parliaments is that this clause has been written – without public consent, and often in conditions of extreme secrecy – inside trade treaties.

A Concrete Case: The Cumbrian Coalmine

Last year, activists secured a significant win at the senior court. The judge found that plans to excavate the first major coal mine in the UK for a generation, in northwest England, were wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The incoming administration later cancelled the consent the former government had issued. Now, this legal outcome faces being overturned by an offshore tribunal reporting to only the entities filing the suit.

In August, a company whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The claimant is suing the UK for the profits it might have made if the mine had been allowed to go ahead. We have no clear indication how much this sum represents. Who is representing it in opposition to the British government? A sitting MP, and previous senior legal advisor in the outgoing administration, that great patriot the MP. The state passes a law, the national judiciary 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 court on the coalmine case 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. We know scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the sanctions the UK enacted against him after the war in Ukraine. He has previously filed a claim against another European state with similar intent, claiming a colossal sum: equivalent to half of nation's annual revenue. Among the lawyers on his side? the wife of a former prime minister, spouse of the former British prime minister.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This unprecedented, secretive influence over elected governments could be blocking the money Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that such things could not occur. Years ago, a former prime minister, promoting the most significant and hazardous of all investment pacts, stated: “Britain has agreed to trade deal after trade deal and we have never seen a problem in the past.” An adviser on this matter described critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by widespread derision.

That prediction has now materialised. Recently, oil and gas and mining firms have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to prevent climate breakdown. Firms have to date won vast sums via ISDS, of which energy giants have secured the majority. That equates to the combined GDP