Greetings, Foreign Magnates and Firms! Please Proceed and Litigate Against the UK for Billions.

What is your understand our political system functions? Maybe something like this. We elect MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. Well, that used to be how it once functioned. No longer.

The Rise of Shadow Arbitration Panels

In the modern era, overseas companies, or the billionaires behind them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by commercial attorneys. The cases are held in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, including enterprises operating from this country. They are open exclusively to corporations operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant damages of hundreds of millions, potentially billions.

These sums are based not on actual losses but compensation the panel members determine the company would perhaps have made. The administration may have to abandon its policy. It is discouraged from introducing similar legislation in that area, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being initiated, as firms observe each other, and hedge funds finance suits in exchange for a portion of the settlements. The result? Democratic sovereignty and democratic governance are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override domestic law and the rulings taken by elected bodies is that this stipulation has been inserted – absent public approval, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the senior court. The justice determined that proposals to open the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, had been wrongly permitted by the outgoing administration, which had accepted the extraordinary assertion that the mine would have no impact on national carbon targets. The new government later cancelled the permission the Tories had granted. Today, this victory could be compromised by an foreign court accountable to no one but the corporations bringing the case.

During August, a firm whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. Recently a dispute settlement body in the United States was set up to consider the case.

The claimant is litigating against the UK for the revenue it might have made if the mine had received permission to go ahead. Citizens have no clear indication how much this could amount to. Which individual is representing it challenging the UK administration? An elected representative, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a international entity disputes it through an secretive arbitration panel, and a sitting MP acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. The public knows scarce of the case at present, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK levied against him subsequent to the invasion of Ukraine. He has previously started suing a small nation with similar intent, seeking $16bn: half that nation's annual revenue. Part of the legal team representing him there? a prominent lawyer, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be subject to litigation in the secret arbitration panels, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the money Ukraine urgently requires.

False Assurances and Mounting Threats

We were assured that these events wouldn’t happen. Years ago, a senior politician, advocating for the largest and riskiest of all these agreements, declared: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” An expert on this issue described campaigners of “exaggeration … the fact is, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that exclusively weaker states had to worry about ISDS claims. Predictions that “when companies start to realise the power they’ve been granted, they will turn their attention from the weak nations to the wealthy nations” were greeted by scepticism.

That warning has now materialised. This year, oil and gas and mining firms have filed a unprecedented number of claims against nations across the economic spectrum, opposing – like the example of the Whitehaven project – official measures to prevent environmental catastrophe. Corporations have to date won $114bn via ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That represents the combined GDP