Welcome, Overseas Magnates and Companies! Please Proceed and Litigate Against the UK for Billions.

What is your reckon our democratic process functions? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. The law is upheld by the courts. Simple as that. Well, that used to be how it used to work. Not anymore.

The Advent of Secret Courts

Nowadays, international firms, or the billionaires behind them, have the power to sue governments for the laws they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. You or I are barred from bringing a case to them, nor can our government, or even companies based in this country. The door is open exclusively to businesses based overseas.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, running into billions.

These sums constitute not real financial harm but funds the panel members conclude the company might otherwise have made. The administration might be compelled to rescind the measure. It will be hesitant to passing future laws in that area, due to the risk of facing litigation.

A Process Running Rampant

Record numbers of legal actions are being filed, as companies take cues from each other, and hedge funds finance suits in exchange for a share of the settlements. The result? Democratic sovereignty and popular rule are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it can supersede national legislation and the choices taken by parliaments is that this stipulation has been written – without public consent, and typically amid an atmosphere of extreme secrecy – inside trade treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, environmental campaigners secured a significant win at the high court. The judge found that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, were wrongly permitted by the outgoing administration, which had endorsed the questionable argument that the mine could have zero effect on national carbon targets. The Labour government later cancelled the permission the former government had approved. Today, this victory could be compromised by an foreign court accountable to no one but the entities petitioning it.

Last August, a firm whose beneficial owners are located in the offshore financial centre lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was established to hear it.

The company is litigating against the UK for the money it would have generated if the mine had been allowed to proceed. We have little idea how much this sum represents. Who is acting on its behalf challenging the state? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The administration passes a law, the national judiciary supports it, then a international entity disputes it through an secretive offshore tribunal, and a sitting MP represents its behalf.

The Russian Challenge

Simultaneously that the panel on the coal mine dispute was convened, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. Details are nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has previously started suing a small nation for this reason, demanding sixteen billion dollars: half that state's annual revenue. Part of the counsel acting for him in that case? a prominent lawyer, wife of the ex-UK leader.

International law scholars argue that the EU’s procrastination in utilising seized Russian assets as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states may be obstructing the funds Ukraine critically depends on.

False Assurances and Mounting Risks

The public was told that such things wouldn’t happen. Previously, a government leader, promoting the biggest and most dangerous of all such treaties, told us: “The UK has signed trade agreement after trade deal and we have never seen a problem in the past.” An expert on this issue accused campaigners of “alarmism … in reality, ISDS barely touches the UK much”. The prevailing narrative appeared to be that solely developing countries should be concerned by ISDS claims. Predictions that “once firms grasp the influence they’ve been granted, they will shift their focus from the vulnerable countries to the wealthy nations” were met with scepticism.

That warning has now materialised. In the current period, energy and resource corporations have filed a unprecedented number of suits against nations across the economic spectrum, opposing – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have secured the majority. That is equivalent to the combined GDP