Welcome, Foreign Oligarchs and Companies! Please Come and Take Legal Action Against the UK for Vast Sums.

What is your reckon our democratic process operates? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. Well, that’s how it operated in the past. Those days are over.

The Emergence of Shadow Courts

In the modern era, overseas companies, or the oligarchs behind them, can sue governments for the laws they pass, at offshore tribunals made up of commercial attorneys. These proceedings are conducted behind closed doors. Unlike our courts, these panels provide no opportunity to 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. The door is open only to entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s projected profits, it has the power to grant damages of vast sums, running into billions.

This compensation represent not real financial harm but compensation the tribunal officials conclude the company could potentially have made. The government may have to abandon its policy. It is hesitant to introducing similar legislation in that area, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being brought, as firms learn from each other, and investment funds fund legal actions in return for a cut of the settlements. The outcome? Sovereignty and democracy are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the choices enacted by elected bodies is that this stipulation has been inserted – without public consent, and frequently under a climate of profound opacity – within bilateral investment treaties.

A Specific Case: The UK Coalmine

Twelve months ago, a conservation group won a great victory at the High Court. The justice ruled that plans to dig the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have had no consequence on our carbon budgets. The incoming administration subsequently revoked the licence the former government had issued. Currently, this legal outcome could be compromised by an offshore tribunal accountable to only the corporations bringing the case.

Last August, a firm whose final controllers are located in the Cayman Islands initiated proceedings versus the UK government. The previous week a dispute settlement body in the US capital was convened to consider the case.

This firm is seeking compensation from the UK for the money it could have earned if the mine had received permission to proceed. Citizens have no clear indication how much this might be. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and previous senior legal advisor in the previous government, the noted patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

A Sanctions Case

Simultaneously that the panel on the mining lawsuit was appointed, it was revealed from a parliamentary answer that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he will utilise the tribunal to challenge the restrictions the UK imposed on him after the Russian aggression. He has already initiated proceedings against Luxembourg with similar intent, demanding $16bn: equivalent to half of government’s yearly budget. Included in the lawyers on his side? the wife of a former prime minister, wife of the ex-UK leader.

International law scholars argue that the EU’s delay in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over democratic administrations may be obstructing the funds Ukraine urgently requires.

False Assurances and Escalating Risks

We were assured that these events were not possible. Previously, a former prime minister, advocating for the most significant and hazardous of all investment pacts, stated: “We’ve signed trade agreement after trade deal and we have never seen a issue in the past.” A consultant on this matter labelled campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The general impression seemed to be that exclusively weaker states should be concerned by ISDS claims. Warnings that “once firms begin to understand the influence they’ve been granted, they will shift their focus from the weak nations to the strong ones” were greeted by general mockery.

That prediction has come to pass. In the current period, energy and extraction companies have filed a historic level of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – government attempts to prevent global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That equates to the combined GDP