Hello, Overseas Magnates and Firms! Please Come and Take Legal Action Against the UK for Billions.

What is your understand our system of government operates? It could be similar to this. Citizens choose MPs. They legislate on bills. If a majority is achieved, the bills pass into law. Statutes is upheld by the courts. That's it. However, that’s how it used to work. Not anymore.

The Advent of Shadow Courts

Nowadays, international firms, and the wealthy individuals that control them, can sue elected administrations for the regulations they pass, at secret arbitration panels composed of commercial attorneys. The cases are held behind closed doors. Unlike our courts, these bodies allow no opportunity to appeal or oversight by judges. Ordinary citizens cannot take a case to them, just as our government, or even enterprises operating from this country. Access is granted solely for businesses registered abroad.

When a secret court determines that a government measure might diminish the corporation’s expected profits, it may order damages of vast sums, running into billions.

This compensation represent not tangible damages but money the tribunal officials decide the company would perhaps have made. The government could be forced to abandon its policy. It becomes deterred from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of disputes are being filed, as corporations take cues from each other, and private equity finance suits in return for a cut of the takings. The outcome? National sovereignty and democracy are now too costly.

The process is known as “investor-state dispute settlement” (ISDS). The reason it can trump domestic law and the choices taken by parliaments is that this provision has been inserted – absent public approval, and often in an atmosphere of profound opacity – within trade treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the senior court. The judge found that proposals to dig the first major coal mine in the UK for 30 years, in northwest England, were illegally sanctioned by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the licence the former government had granted. Today, this success is under threat by an secret arbitration panel reporting to exclusively the corporations petitioning it.

In August, a firm whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the US capital was convened to hear it.

The claimant is litigating against the UK for the profits it would have generated if the mine had been permitted to commence operations. We have no idea how much this sum represents. Who is representing it against the British government? A member of parliament, and ex-law officer in the previous government, the self-proclaimed patriot Geoffrey Cox. The administration passes a law, the national judiciary supports it, then a foreign company challenges it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

The Russian Case

On the same day that the panel on the coalmine case was appointed, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows nothing of the case to date, but it appears probable that he’ll use the tribunal to challenge the restrictions the UK enacted against him following the invasion of Ukraine. He has initiated proceedings against a small nation with similar intent, seeking a colossal sum: an amount representing half state's annual revenue. Included in the counsel representing him there? Cherie Blair, married to the ex-UK leader.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as guarantee for its loan to Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over elected governments might be preventing the finance Ukraine critically depends on.

Misleading Claims and Growing Costs

The public was told that these scenarios wouldn’t happen. Previously, a government leader, championing the biggest and most dangerous of all such treaties, declared: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” An expert on this issue labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message was crafted to be that only poorer nations had to worry about such legal actions. Warnings that “when companies start to realise the authority bestowed upon them, they will turn their attention from the poorer states to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. Recently, oil and gas and resource corporations have filed a record number of claims against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to halt climate breakdown. Firms have thus far won vast sums through ISDS, of which fossil fuel companies have secured eighty-four billion dollars. That is equivalent to the combined GDP