Welcome, Foreign Oligarchs and Companies! Kindly Come and Litigate Against the UK for Vast Sums.

How do you reckon our political system works? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. However, that used to be how it used to work. Those days are over.

The Emergence of Offshore Arbitration Panels

Today, foreign corporations, and the oligarchs that control them, have the power to sue elected administrations for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or legal review. The general public cannot take a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for entities operating from foreign soil.

Should an arbitration panel rules that a law or policy may compromise the corporation’s expected profits, it may order financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on tangible damages but compensation the tribunal officials determine the company could potentially have made. The administration could be forced to rescind the measure. It becomes deterred from enacting future policies in that area, due to the risk of facing litigation.

A Process Growing Exponentially

Record numbers of disputes are being filed, as corporations take cues from each other, and hedge funds bankroll lawsuits in exchange for a share of the takings. The result? National sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is allowed to override national legislation and the choices enacted by elected bodies is that this provision has been written – absent public approval, and typically amid a climate of profound opacity – into trade treaties.

A Concrete Instance: The Whitehaven Coalmine

Last year, environmental campaigners secured a significant win at the senior court. The justice ruled that schemes to dig the first deep coalmine in the UK for three decades, in Cumbria, had been illegally sanctioned by the Conservative government, which had endorsed the extraordinary assertion that the mine could have no consequence on national carbon targets. The new government subsequently revoked the licence the former government had granted. Currently, this victory could be compromised by an foreign court reporting to only the corporations filing the suit.

During August, a company whose ultimate owners are based in the tax haven lodged a claim challenging the UK government. Last week a tribunal in the United States was set up to hear it.

The claimant is litigating against the UK for the money it could have earned if the mine had been allowed to go ahead. Citizens have no clear indication how much this could amount to. Who is representing it challenging the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court supports it, then a international entity contests it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Challenge

Concurrently that the tribunal on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows scarce of the case so far, but it appears probable that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has initiated proceedings against Luxembourg for this reason, demanding a colossal sum: half that state's yearly income. Part of the counsel on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised oligarchs' funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the funds Ukraine desperately needs.

Misleading Claims and Escalating Costs

We were assured that such things could not occur. Previously, a former prime minister, promoting the biggest and most dangerous of all such treaties, told us: “We’ve signed trade deal upon trade deal and there has not been a problem in the past.” An adviser on this issue described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries needed to fear such legal actions. Cautionary notes that “once firms grasp the influence they’ve been granted, they will turn their attention from the weak nations to the strong ones” were dismissed with widespread derision.

That threat has now materialised. This year, oil and gas and mining firms have lodged a historic level of claims against nations both wealthy and developing, challenging – like the example of the UK mine – state efforts to prevent climate breakdown. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP