Hello, Foreign Oligarchs and Firms! Please Proceed and Take Legal Action Against the UK for Billions of Pounds.

Can you reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. End of story. However, that’s how it once functioned. Those days are over.

The Advent of Secret Courts

In the modern era, overseas companies, or the billionaires who own them, have the power to sue nation states for the policies they pass, at offshore tribunals made up of commercial attorneys. The cases are conducted behind closed doors. In contrast to domestic courts, these bodies grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, and neither can our government, including companies based in this country. Access is granted solely for businesses operating from foreign soil.

Should an arbitration panel finds that a law or policy might diminish the corporation’s projected profits, it may order financial penalties of vast sums, even billions.

These sums are based not on real financial harm but money the panel members determine the company could potentially have made. The government may have to abandon its policy. It is hesitant to introducing similar legislation in that area, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as firms observe each other, and investment funds bankroll lawsuits for a share of a portion of the settlements. The outcome? National sovereignty and popular rule are now prohibitively expensive.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to override a country's own laws and the decisions made by elected bodies is that this provision has been inserted – without public consent, and often in conditions of total confidentiality – within international trade agreements.

A Real-World Case: The UK Coal Mine

Last year, a conservation group secured a significant win at the senior court. The presiding officer ruled that schemes to open the first new deep coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the permission the former government had granted. Today, this victory could be compromised by an foreign court accountable to only the corporations filing the suit.

In August, a corporate entity whose beneficial owners are based in the Cayman Islands filed a lawsuit challenging the UK government. The previous week a tribunal in Washington DC was established to adjudicate on it.

This firm is suing the UK for the money it might have made if the mine had received permission to go ahead. We have no clear indication how much this sum represents. What legal team is acting on its behalf in opposition to the state? A sitting MP, and ex-law officer in the outgoing administration, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court upholds it, then a foreign company contests it through an unaccountable private court, and a member of our parliament acts on its behalf.

An Oligarch's Lawsuit

On the same day that the panel on the coal mine dispute was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, a sanctioned individual. Details are little of the case so far, but it appears probable that he will utilise the tribunal to contest the penalties the UK levied against him after the war in Ukraine. He has already initiated proceedings against a small nation on these grounds, claiming a colossal sum: half that nation's yearly budget. Part of the lawyers on his side? a prominent lawyer, married to the previous PM.

International law scholars argue that the EU’s procrastination in leveraging immobilised state funds as guarantee for its aid for Ukraine stems from Belgium’s fear that it could be sued in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these scenarios could not occur. Years ago, a government leader, promoting the biggest and most dangerous of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a problem in the past.” An adviser on this issue labelled campaigners of “alarmism … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms start to realise the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were dismissed with widespread derision.

That prediction has come to pass. Recently, fossil fuel and extraction companies have filed a unprecedented number of claims against nations across the economic spectrum, challenging – as in the case of the UK mine – official measures to stop environmental catastrophe. Firms have to date won $114bn via ISDS, of which oil majors have been awarded the majority. That represents the combined GDP