Welcome, Foreign Oligarchs and Firms! Kindly Proceed and Litigate Against the UK for Billions.

Can you perceive our democratic process functions? It could be similar to this. Citizens choose MPs. They vote on bills. Should a majority is obtained, the bills pass into law. The law is upheld by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, foreign corporations, and the oligarchs who own them, are able to litigate against governments for the laws they pass, at private courts staffed by commercial attorneys. Such disputes are held in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even enterprises based in this country. They are open solely for entities based overseas.

If a tribunal rules that a legislative action may compromise the corporation’s expected profits, it has the power to grant financial penalties of vast sums, potentially billions.

These awards constitute not actual losses but compensation the arbitrators decide the company could potentially have made. The state could be forced to rescind the measure. It becomes deterred from introducing similar legislation in that area, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and hedge funds finance suits in return for a share of the settlements. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to supersede national legislation and the decisions made by elected bodies is that this provision has been incorporated – without democratic mandate, and frequently under conditions of extreme secrecy – within trade treaties.

A Concrete Example: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The justice determined that schemes to open the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine could have zero effect on national carbon targets. The new government later cancelled the permission the previous administration had issued. Now, this legal outcome faces being overturned by an offshore tribunal reporting to no one but the entities petitioning it.

During August, a company whose final controllers are located in the tax haven initiated proceedings versus the UK government. Recently a arbitration panel in Washington DC was convened to hear it.

The claimant is suing the UK for the revenue it might have made if the mine had been permitted to proceed. Citizens have little idea how much this might be. Which individual is acting on its behalf against the UK administration? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the high court supports it, then a international entity contests it through an undemocratic arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coalmine case was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows nothing of the case at present, but it appears probable that he will utilise the tribunal to fight the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has previously started suing another European state with similar intent, demanding $16bn: an amount representing half nation's annual revenue. Included in the lawyers on his side? a prominent lawyer, spouse of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized state funds as security for its financial support package stems from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over sovereign states could be blocking the funds Ukraine critically depends on.

Empty Promises and Growing Costs

We were assured that these events wouldn’t happen. Years ago, a former prime minister, promoting the largest and riskiest of all such treaties, stated: “Britain has agreed to trade agreement after trade deal and we have never seen a case in the past.” An expert on this issue described critics of “scaremongering … the fact is, ISDS has little impact on the UK much”. The general impression was crafted to be that exclusively weaker states had to worry about ISDS claims. Warnings that “when companies begin to understand the power bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were met with widespread derision.

That warning has come to pass. This year, energy and mining firms have filed a historic level of cases against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to stop global warming. Companies have thus far won vast sums by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP