Hello, Foreign Oligarchs and Firms! Please Come and Sue the UK for Billions.

How do you understand our political system works? Maybe something like this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills pass into law. The law are enforced by the courts. Simple as that. However, that used to be how it once functioned. Not anymore.

The Emergence of Shadow Arbitration Panels

Today, overseas companies, and the wealthy individuals who own them, are able to litigate against governments for the laws they pass, at private courts staffed by business advocates. The cases take place in secret. In contrast to domestic courts, these panels provide no opportunity to appeal or judicial review. You or I are unable to file a case to them, and neither can our government, or even companies headquartered in this country. They are open only to businesses based overseas.

If a tribunal rules that a legislative action might diminish the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums are based not on real financial harm but compensation the panel members conclude the company could potentially have made. The administration might be compelled to abandon its policy. It is deterred from enacting future policies along the same lines, for fear of facing litigation.

A System Running Rampant

Record numbers of legal actions are being initiated, as firms observe each other, and hedge funds finance suits in exchange for a share of the takings. The outcome? Democratic sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump national legislation and the decisions enacted by parliaments is that this stipulation has been incorporated – without public consent, and frequently under conditions of total confidentiality – into trade treaties.

A Concrete Case: The Whitehaven Coalmine

Twelve months ago, activists won a great victory at the high court. The presiding officer ruled that plans to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had accepted the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government later cancelled the consent the former government had approved. Currently, this success faces being overturned by an foreign court reporting to only the entities bringing the case.

During August, a firm whose beneficial owners are located in the Cayman Islands initiated proceedings challenging the UK government. Recently a dispute settlement body in Washington DC was established to hear it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had received permission to go ahead. We have no clear indication how much this might be. What legal team is serving as its counsel challenging the UK administration? An elected representative, and former attorney-general in the previous government, that great patriot the MP. The administration makes a decision, the national judiciary upholds it, then a international entity contests it through an unaccountable private court, and a member of our parliament works for its behalf.

The Russian Lawsuit

Concurrently that the tribunal on the coal mine dispute was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. Details are scarce of the case so far, but it seems likely that he’ll use the arbitration process to contest the sanctions the UK enacted against him after the war in Ukraine. He has started suing a small nation on these grounds, seeking $16bn: half that government’s annual revenue. Part of the legal team acting for him in that case? the wife of a former prime minister, wife of the former British prime minister.

Legal experts believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as guarantee for its financial support package arises from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a investment pact. This unprecedented, unaccountable authority over elected governments may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these scenarios could not occur. In 2014, a government leader, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty upon trade deal and we have never seen a problem in the past.” An expert on this matter labelled activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “when companies grasp the power they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by widespread derision.

That threat has come to pass. In the current period, fossil fuel and resource corporations have filed a record number of suits against nations across the economic spectrum, contesting – as in the case of the Cumbrian coalmine – government attempts to halt climate breakdown. Companies have to date won vast sums through ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP