Hello, Overseas Oligarchs and Companies! Kindly Come and Sue the UK for Vast Sums.

How do you reckon our system of government functions? Maybe along the lines of this. We elect MPs. They debate and pass bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. End of story. Well, that used to be how it used to work. No longer.

The Emergence of Secret Courts

In the modern era, foreign corporations, along with the wealthy individuals who own them, can sue nation states for the regulations they pass, at offshore tribunals made up of corporate lawyers. The cases take place away from public scrutiny. Differing from national judiciaries, these tribunals allow no opportunity to appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even companies based in this country. Access is granted only to corporations registered abroad.

If a tribunal finds that a law or policy might diminish the corporation’s projected profits, it can award compensation of hundreds of millions of pounds, even billions.

This compensation are based not on real financial harm but funds the tribunal officials determine the company would perhaps have made. The government could be forced to abandon its policy. It becomes hesitant to introducing similar legislation along the same lines, worried about incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of disputes are being initiated, as corporations take cues from each other, and hedge funds finance suits in return for a cut of the settlements. The outcome? Democratic sovereignty and democratic governance are now unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can supersede national legislation and the rulings enacted by legislatures is that this provision has been written – without democratic mandate, and often in conditions of total confidentiality – into bilateral investment treaties.

A Concrete Instance: The UK Coalmine

A year ago, a conservation group achieved a major legal triumph at the high court. The judge found that schemes to dig the first major coal mine in the UK for a generation, in northwest England, had been illegally sanctioned by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have had zero effect on national carbon targets. The Labour government later cancelled the consent the Tories had approved. Currently, this victory is under threat by an foreign court answering to only the entities filing the suit.

In August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week 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 received permission to proceed. We have no idea how much this sum represents. What legal team is acting on its behalf against the UK administration? A sitting MP, and ex-law officer in the previous government, that great patriot the MP. The administration enacts a policy, the high court upholds it, then a overseas corporation disputes it through an undemocratic offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Lawsuit

Concurrently that the tribunal on the coal mine dispute was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case so far, but it seems likely that he’ll use the arbitration process to contest the penalties the UK levied against him following the war in Ukraine. He has already started suing a small nation on these grounds, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Part of the legal team on his side? Cherie Blair, wife of the former British prime minister.

Trade specialists argue that the EU’s delay in utilising seized state funds as collateral for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a investment pact. This extraordinary, unaccountable authority over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Mounting Threats

We were assured that these scenarios wouldn’t happen. In 2014, a government leader, championing the biggest and most dangerous of all investment pacts, stated: “We’ve signed investment treaty upon trade deal and there has never been a case in the past.” An adviser on this issue accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that exclusively weaker states should be concerned by such legal actions. Warnings that “when companies start to realise the authority they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were met with scepticism.

That warning has come to pass. In the current period, oil and gas and extraction companies have lodged a unprecedented number of cases against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Firms have to date won one hundred and fourteen billion dollars by using ISDS, of which oil majors have obtained eighty-four billion dollars. That is equivalent to the combined GDP