Hello, Foreign Tycoons and Companies! Please Come and Take Legal Action Against the UK for Billions.

What is your understand our political system operates? Maybe along the lines of this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that used to be how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

Nowadays, overseas companies, and the oligarchs who own them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held in secret. Unlike our courts, these bodies provide no right of appeal or oversight by judges. The general public are barred from bringing a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted exclusively to businesses registered abroad.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These awards constitute not actual losses but money the tribunal officials determine the company might otherwise have made. The administration could be forced to drop the legislation. It becomes deterred from enacting future policies of a similar nature, due to the risk of being sued.

A Process Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as firms observe each other, and private equity bankroll lawsuits in return for a portion of the takings. The result? National sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the decisions made by elected bodies is that this stipulation has been written – without public consent, and often in an atmosphere of profound opacity – within trade treaties.

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the senior court. The presiding officer found that proposals to open the first new deep coal mine in the UK for a generation, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The Labour government then withdrew the licence the Tories had issued. Currently, this victory faces being overturned by an secret arbitration panel accountable to only the corporations filing the suit.

In August, a corporate entity whose final controllers are located in the offshore financial centre lodged a claim challenging the UK government. The previous week a arbitration panel in the US capital 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 permitted to go ahead. Citizens have little idea how much this could amount to. Who is representing it in opposition to the state? A sitting MP, and previous senior legal advisor in the previous government, that great patriot the MP. The state passes a law, the high court upholds it, then a international entity disputes it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the court on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian billionaire, Mikhail Fridman. We know little of the case at present, but it seems likely that he may employ the tribunal to challenge the sanctions the UK levied against him after the Russian aggression. He has started suing another European state on these grounds, claiming a colossal sum: half that government’s yearly budget. Among the lawyers representing him there? Cherie Blair, spouse of the ex-UK leader.

Trade specialists contend that the EU’s procrastination in utilising seized state funds as guarantee for its aid for Ukraine stems from concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This extraordinary, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

False Assurances and Escalating Costs

Politicians promised that these scenarios could not occur. Years ago, a senior politician, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has not been a issue in the past.” A consultant on this matter described activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “when companies start to realise the power they now possess, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That prediction has come to pass. This year, fossil fuel and resource corporations have lodged a historic level of claims against nations rich and poor, challenging – like the example of the Whitehaven project – government attempts to prevent global warming. Companies have to date won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded eighty-four billion dollars. That is equivalent to the combined GDP