Welcome, Overseas Magnates and Corporations! Kindly Come and Litigate Against the UK for Vast Sums.

How do you understand our democratic process functions? It could be along the lines of this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes are enforced by the courts. End of story. However, that was how it once functioned. No longer.

The Emergence of Shadow Tribunals

Today, international firms, along with the wealthy individuals that control them, can sue elected administrations for the laws they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted in secret. Unlike our courts, these panels grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. They are open exclusively to corporations based overseas.

Should an arbitration panel finds that a law or policy may compromise the corporation’s anticipated profits, it can award compensation of hundreds of millions, potentially billions.

This compensation are based not on tangible damages but money the panel members determine the company could potentially have made. The administration could be forced to rescind the measure. It will be discouraged from enacting future policies along the same lines, worried about facing litigation.

A System Spiralling Out of Control

Historically high figures of disputes are being brought, as firms learn from each other, and private equity finance suits in return for a share of the settlements. The result? Democratic sovereignty and popular rule are becoming prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede a country's own laws and the decisions enacted by parliaments is that this clause has been incorporated – absent public approval, and frequently under an atmosphere of profound opacity – inside trade treaties.

A Concrete Example: The Whitehaven Coalmine

A year ago, a conservation group secured a significant win at the senior court. The judge ruled that schemes to open the first major coal mine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the outgoing administration, which had endorsed the questionable argument that the mine could have no impact on national carbon targets. The new government later cancelled the consent the previous administration had approved. Today, this victory faces being overturned by an secret arbitration panel answering to no one but the entities filing the suit.

Last August, a company whose ultimate owners are located in the tax haven initiated proceedings challenging the UK government. Last week a dispute settlement body in the United States was set up to hear it.

This firm is suing the UK for the profits it would have generated if the mine had been allowed to proceed. We have little idea how much this might be. Who is acting on its behalf against the UK administration? A sitting MP, and previous senior legal advisor in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The government passes a law, the domestic court supports it, then a international entity disputes it through an unaccountable offshore tribunal, and a sitting MP works for its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coal mine dispute was appointed, we learned from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. The public knows little of the case so far, but it appears probable that he will utilise the tribunal to fight the sanctions the UK enacted against him following the Russian aggression. He has already filed a claim against Luxembourg with similar intent, claiming $16bn: half that government’s yearly income. Among the counsel acting for him in that case? Cherie Blair, wife of the previous PM.

Legal experts contend that the EU’s hesitation in using frozen Russian assets as security for its loan to Ukraine is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations could be blocking the finance Ukraine urgently requires.

False Assurances and Mounting Threats

The public was told that these scenarios were not possible. Years ago, a government leader, promoting the most significant and hazardous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” An adviser on this matter described critics of “exaggeration … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that solely developing countries needed to fear such legal actions. Warnings that “once firms begin to understand the authority bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were met with general mockery.

That threat has come to pass. In the current period, fossil fuel and extraction companies have lodged a historic level of suits against nations rich and poor, opposing – as in the case of the UK mine – state efforts to prevent environmental catastrophe. Corporations have thus far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP