Greetings, Overseas Magnates and Corporations! Please Come and Take Legal Action Against the UK for Billions.

How do you perceive our system of government works? It could be something like this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills pass into law. The law are enforced by the courts. End of story. Yet, that was how it once functioned. Not anymore.

The Rise of Secret Tribunals

Nowadays, international firms, and the billionaires behind them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these tribunals allow no opportunity to appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even companies headquartered in this country. Access is granted only to entities based overseas.

Should an arbitration panel determines that a government measure could harm the corporation’s anticipated profits, it can award damages of vast sums, even billions.

These sums constitute not actual losses but compensation the panel members determine the company would perhaps have made. The state might be compelled to rescind the measure. It will be discouraged from introducing similar legislation in that area, worried about facing litigation.

A Process Spiralling Out of Control

Historically high figures of legal actions are being brought, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the settlements. The result? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is permitted to supersede national legislation and the choices enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and typically amid conditions of total confidentiality – into trade treaties.

A Specific Instance: The Cumbrian Coalmine

Last year, environmental campaigners secured a significant win at the high court. The judge found that schemes to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine could have no impact on our carbon budgets. The new government then withdrew the licence the Tories had issued. Now, this success faces being overturned by an foreign court answering to no one but the corporations petitioning it.

During August, a company whose beneficial owners reside in the offshore financial centre lodged a claim challenging the UK government. The previous week a tribunal in the US capital was established to consider the case.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. The public has no idea how much this might be. What legal team is acting on its behalf against the British government? An elected representative, and former attorney-general in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the domestic court upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he will utilise the ISDS mechanism to challenge the penalties the UK imposed on him following the invasion of Ukraine. He has previously initiated proceedings against Luxembourg with similar intent, seeking sixteen billion dollars: half that nation's yearly budget. Among the legal team on his side? a prominent lawyer, married to the ex-UK leader.

Legal experts contend that the EU’s delay in utilising seized Russian assets as guarantee for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over democratic administrations may be obstructing the money Ukraine urgently requires.

Misleading Claims and Mounting Threats

We were assured that such things wouldn’t happen. In 2014, a former prime minister, advocating for the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and we have never seen a issue in the past.” A consultant on this topic described activists of “scaremongering … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that exclusively weaker states needed to fear ISDS claims. Cautionary notes that “once firms start to realise the authority bestowed upon them, they will shift their focus from the weak nations to the strong ones” were greeted by scepticism.

That threat has come to pass. This year, energy and extraction companies have filed a record number of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – government attempts to stop global warming. Corporations have thus far won vast sums via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That is equivalent to the combined GDP