Welcome, Foreign Oligarchs and Companies! Kindly Proceed and Litigate Against the UK for Billions of Pounds.

How do you understand our system of government works? It could be similar to this. Citizens choose MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. The law is upheld by the courts. End of story. Well, that was how it used to work. Not anymore.

The Emergence of Shadow Tribunals

Today, foreign corporations, or the billionaires behind them, can sue governments for the policies they pass, at private courts staffed by corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, and neither can our government, or even companies headquartered in this country. Access is granted exclusively to businesses operating from foreign soil.

If a tribunal rules that a law or policy might diminish the corporation’s expected profits, it may order damages of vast sums, even billions.

These awards constitute not real financial harm but compensation the panel members conclude the company might otherwise have made. The administration may have to rescind the measure. It is hesitant to enacting future policies along the same lines, due to the risk of facing litigation.

A Process Running Rampant

Unprecedented levels of disputes are being brought, as firms learn from each other, and private equity finance suits in return for a share of the settlements. The consequence? Sovereignty and popular rule are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede domestic law and the choices taken by parliaments is that this clause has been inserted – without public consent, and typically amid a climate of total confidentiality – into trade treaties.

A Real-World Instance: The UK Coalmine

A year ago, a conservation group secured a significant win at the senior court. The justice determined that schemes to excavate the first deep coalmine in the UK for a generation, in northwest England, had been unlawfully approved by the previous government, which had agreed to the questionable argument that the mine could have no consequence on our carbon budgets. The new government then withdrew the consent the former government had approved. Currently, this legal outcome could be compromised by an foreign court answering to only the entities petitioning it.

Last August, a company whose beneficial owners reside in the Cayman Islands initiated proceedings against the UK government. Recently a tribunal in Washington DC was established to hear it.

This firm is litigating against the UK for the profits it would have generated if the mine had been allowed to go ahead. The public has little idea how much this could amount to. Which individual is serving as its counsel challenging the UK administration? A sitting MP, and ex-law officer in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

A Sanctions Case

Simultaneously that the tribunal on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case at present, but it is highly possible that he will utilise the tribunal to fight the penalties the UK imposed on him after the Russian aggression. He has previously initiated proceedings against another European state for this reason, demanding $16bn: half that government’s yearly income. Included in the counsel acting for him in that case? the wife of a former prime minister, wife of the previous PM.

Trade specialists argue that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, undemocratic power over sovereign states could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, championing the largest and riskiest of all these agreements, stated: “We’ve signed trade deal after trade deal and we have never seen a case in the past.” An expert on this topic described activists of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations had to worry about such legal actions. Predictions that “when companies grasp the influence they now possess, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That prediction has come to pass. In the current period, oil and gas and mining firms have initiated a unprecedented number of suits against nations both wealthy and developing, challenging – similar to the UK mine – government attempts to prevent climate breakdown. Companies have to date won vast sums through ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP