Hello, Foreign Oligarchs and Firms! Kindly Come and Take Legal Action Against the UK for Billions.

How do you reckon our system of government functions? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that’s how it operated in the past. No longer.

The Emergence of Secret Tribunals

In the modern era, international firms, or the wealthy individuals that control them, can sue governments for the policies they pass, at secret arbitration panels staffed by corporate lawyers. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies provide no avenue for appeal or legal review. The general public are barred from bringing a case to them, just as our government, or even companies based in this country. They are open exclusively to entities operating from foreign soil.

Should an arbitration panel determines that a law or policy may compromise the corporation’s anticipated profits, it can award damages of hundreds of millions, even billions.

These sums are based not on real financial harm but money the panel members determine the company could potentially have made. The administration might be compelled to drop the legislation. It becomes deterred from introducing similar legislation along the same lines, worried about being sued.

A Mechanism Growing Exponentially

Unprecedented levels of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions in exchange for a portion of the settlements. The consequence? Sovereignty and democracy are becoming unaffordable.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump national legislation and the choices enacted by elected bodies is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Real-World Example: The Cumbrian Coalmine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer determined that schemes to excavate the first deep coalmine in the UK for a generation, in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The new government then withdrew the licence the previous administration had granted. Currently, this success faces being overturned by an offshore tribunal answering to only the corporations petitioning it.

During August, a firm whose final controllers reside in the tax haven initiated proceedings versus the UK government. Last week a tribunal in Washington DC was set up to hear it.

This firm is suing the UK for the revenue it could have earned if the mine had been permitted to proceed. We have no idea how much this might be. Which individual is serving as its counsel against the state? An elected representative, and former attorney-general in the Conservative government, that great patriot Sir Geoffrey Cox. The government makes a decision, the domestic court validates it, then a international entity contests it through an unaccountable arbitration panel, and a elected official acts on its behalf.

An Oligarch's Challenge

Concurrently that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. We know nothing of the case so far, but it seems likely that he will utilise the tribunal to fight the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has already started suing a small nation with similar intent, seeking a colossal sum: equivalent to half of nation's yearly income. Among the counsel representing him there? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from apprehension in Brussels that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over democratic administrations might be preventing the money Ukraine critically depends on.

False Assurances and Escalating Risks

We were assured that such things could not occur. Previously, a former prime minister, advocating for the largest and riskiest of all such treaties, declared: “We’ve signed trade deal upon trade deal and we have never seen a problem in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that only poorer nations needed to fear these lawsuits. Warnings that “when companies grasp the authority they’ve been granted, they will redirect their efforts from the poorer states to the wealthy nations” were met with scepticism.

That prediction has now materialised. This year, energy and extraction companies have filed a record number of cases against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – state efforts to prevent environmental catastrophe. Corporations have so far won vast sums through ISDS, of which oil majors have obtained $84bn. That is equivalent to the combined GDP