Hello, International Tycoons and Firms! Please Proceed and Take Legal Action Against the UK for Vast Sums.

How do you reckon our system of government operates? Perhaps similar to this. The public votes for MPs. They vote on bills. When a majority is achieved, the bills become law. Legislation is maintained by the courts. End of story. Well, that was how it operated in the past. No longer.

The Advent of Offshore Courts

In the modern era, international firms, and the billionaires behind them, have the power to sue governments for the regulations they pass, at private courts made up of business advocates. Such disputes are held in secret. In contrast to domestic courts, these panels allow no avenue for appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even enterprises based in this country. Access is granted exclusively to businesses based overseas.

If a tribunal finds that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These awards are based not on actual losses but money the panel members determine the company might otherwise have made. The state might be compelled to rescind the measure. It becomes discouraged from passing future laws along the same lines, worried about incurring a lawsuit.

A System Growing Exponentially

Historically high figures of legal actions are being filed, as companies observe each other, and investment funds bankroll lawsuits in exchange for a share of the takings. The outcome? Democratic sovereignty and popular rule are becoming too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede a country's own laws and the choices taken by elected bodies is that this provision has been written – without public consent, and often in conditions of profound opacity – inside trade treaties.

A Concrete Case: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The presiding officer found that schemes to open the first deep coalmine in the UK for a generation, in Cumbria, had been illegally sanctioned by the outgoing administration, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the consent the previous administration had granted. Now, this victory faces being overturned by an secret arbitration panel accountable to only the entities filing the suit.

During August, a firm whose ultimate owners are based in the tax haven initiated proceedings challenging the UK government. Recently a tribunal in the United States was established to consider the case.

This firm is seeking compensation from the UK for the revenue it could have earned if the mine had been permitted to go ahead. Citizens have no idea how much this could amount to. Who is serving as its counsel in opposition to the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary supports it, then a overseas corporation disputes it through an secretive private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. We know nothing of the case at present, but it seems likely that he may employ the ISDS mechanism to contest the restrictions the UK levied against him after the war in Ukraine. He has previously filed a claim against another European state for this reason, claiming sixteen billion dollars: half that state's yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Legal experts contend that the EU’s hesitation in leveraging immobilised oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, undemocratic power over democratic administrations could be blocking the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

Politicians promised that these events were not possible. Years ago, a senior politician, advocating for the biggest and most dangerous of all these agreements, stated: “We’ve signed investment treaty after trade deal and we have never seen a issue in the past.” An expert on this matter labelled critics of “exaggeration … the truth is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states had to worry about such legal actions. Cautionary notes that “as corporations start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the strong ones” were dismissed with widespread derision.

That warning is now a reality. This year, energy and extraction companies have lodged a record number of suits against nations both wealthy and developing, opposing – as in the case of the Cumbrian coalmine – government attempts to prevent global warming. Corporations have thus far won vast sums by using ISDS, of which oil majors have been awarded $84bn. That equates to the combined GDP