Welcome, Foreign Oligarchs and Corporations! Please Come and Take Legal Action Against the UK for Billions of Pounds.

Can you perceive our democratic process operates? It could be similar to this. The public votes for MPs. They vote on bills. If a majority is achieved, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that’s how it used to work. Those days are over.

The Advent of Offshore Courts

Nowadays, foreign corporations, or the wealthy individuals behind them, can sue nation states for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public cannot take a case to them, just as our government, including companies headquartered in this country. Access is granted only to businesses operating from foreign soil.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it may order financial penalties of hundreds of millions of pounds, running into billions.

These awards are based not on actual losses but funds the panel members conclude the company could potentially have made. The state may have to drop the legislation. It becomes hesitant to passing future laws of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as firms observe each other, and private equity finance suits in exchange for a portion of the takings. The result? Sovereignty and democracy are turning into unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can override national legislation and the decisions made by legislatures is that this provision has been written – without democratic mandate, and typically amid an atmosphere of profound opacity – into bilateral investment treaties.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to dig the first major coal mine in the UK for a generation, at Whitehaven in Cumbria, were unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on national carbon targets. The incoming administration subsequently revoked the consent the Tories had issued. Currently, this legal outcome could be compromised by an secret arbitration panel reporting to only the companies petitioning it.

In August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. Last week a tribunal in Washington DC was set up to consider the case.

The claimant is seeking compensation from the UK for the profits it could have earned if the mine had been allowed to commence operations. Citizens have no clear indication how much this might be. What legal team is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a international entity challenges it through an unaccountable arbitration panel, and a member of our parliament represents its behalf.

A Sanctions Challenge

Simultaneously that the court on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has started suing another European state for this reason, claiming $16bn: equivalent to half of state's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of the ex-UK leader.

Trade specialists argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its financial support package is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This remarkable, unaccountable authority over elected governments might be preventing the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

The public was told that these scenarios could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has never been a issue in the past.” A consultant on this topic accused activists of “scaremongering … in reality, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries had to worry about these lawsuits. Warnings that “as corporations begin to understand the authority they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat has now materialised. In the current period, fossil fuel and extraction companies have filed a unprecedented number of cases against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to prevent environmental catastrophe. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP