Greetings, Foreign Oligarchs and Companies! Kindly Proceed and Litigate Against the UK for Billions.

How do you reckon our system of government operates? Maybe something like this. We elect MPs. They vote on bills. Should a majority is achieved, the bills become law. The law is maintained by the courts. Simple as that. Yet, that’s how it used to work. No longer.

The Emergence of Secret Tribunals

In the modern era, overseas companies, or the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at offshore tribunals staffed by business advocates. These proceedings are held in secret. In contrast to domestic courts, these panels grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, nor can our government, or even companies based in this country. Access is granted only to businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it has the power to grant damages of vast sums, even billions.

These awards are based not on real financial harm but funds the panel members determine the company might otherwise have made. The government might be compelled to rescind the measure. It will be hesitant to enacting future policies along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Unprecedented levels of disputes are being filed, as companies learn from each other, and hedge funds bankroll lawsuits in exchange for a cut of the settlements. The consequence? Democratic sovereignty and democratic governance are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump domestic law and the decisions taken by legislatures is that this clause has been incorporated – without public consent, and often in an atmosphere of profound opacity – inside trade treaties.

A Real-World Example: The UK Coalmine

Last year, environmental campaigners won a great victory at the high court. The justice found that plans to open the first major coal mine in the UK for three decades, in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the bizarre claim that the mine could have no impact on national carbon targets. The Labour government subsequently revoked the consent the Tories had approved. Now, this legal outcome faces being overturned by an offshore tribunal answering to exclusively the entities petitioning it.

During August, a firm whose beneficial owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a tribunal in the United States was established to hear it.

The company is seeking compensation from the UK for the money it might have made if the mine had received permission to proceed. Citizens have no clear indication how much this could amount to. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the outgoing administration, that great patriot the MP. The state makes a decision, the domestic court upholds it, then a foreign company disputes it through an unaccountable private court, and a elected official acts on its behalf.

A Sanctions Case

Simultaneously that the tribunal on the mining lawsuit was established, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it appears probable that he’ll use the arbitration process to contest the sanctions the UK levied against him after the Russian aggression. He has started suing a small nation on these grounds, demanding $16bn: half that state's annual revenue. Included in the lawyers representing him there? a prominent lawyer, spouse of the previous PM.

Trade specialists argue that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Misleading Claims and Escalating Risks

Politicians promised that such things wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, declared: “Britain has agreed to trade agreement after trade deal and there has not been a problem in the past.” A consultant on this matter accused campaigners of “scaremongering … the fact is, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were dismissed with general mockery.

That prediction is now a reality. In the current period, energy and resource corporations have filed a record number of cases against nations both wealthy and developing, opposing – as in the case of the UK mine – official measures to stop climate breakdown. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which energy giants have been awarded the majority. That is equivalent to the combined GDP