Welcome, Overseas Oligarchs and Firms! Please Proceed and Litigate Against the UK for Vast Sums.

How do you reckon our system of government operates? It could be similar to this. The public votes for MPs. They legislate on bills. If a majority is obtained, the bills pass into law. Legislation are enforced by the courts. That's it. Yet, that used to be how it operated in the past. No longer.

The Advent of Offshore Tribunals

In the modern era, overseas companies, and the wealthy individuals behind them, have the power to sue governments for the policies they pass, at private courts staffed by corporate lawyers. Such disputes take place behind closed doors. Differing from national judiciaries, these tribunals provide no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even enterprises headquartered in this country. Access is granted only to entities registered abroad.

When a secret court determines that a legislative action could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

This compensation represent not actual losses but money the arbitrators decide the company could potentially have made. The administration might be compelled to drop the legislation. It will be hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Process Growing Exponentially

Unprecedented levels of legal actions are being initiated, as companies learn from each other, and investment funds fund legal actions in return for a share of the takings. The outcome? Democratic sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The explanation it can supersede domestic law and the rulings taken by elected bodies is that this clause has been inserted – without democratic mandate, and typically amid a climate of profound opacity – inside trade treaties.

A Concrete Instance: The UK Coalmine

Twelve months ago, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that schemes to excavate the first new deep coal mine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the Conservative government, which had agreed to the questionable argument that the mine would have had zero effect on climate commitments. The incoming administration subsequently revoked the consent the former government had granted. Currently, this legal outcome faces being overturned by an foreign court reporting to exclusively the entities bringing the case.

Last August, a company whose ultimate owners reside in the tax haven lodged a claim versus the UK government. Recently a dispute settlement body in the US capital was convened to adjudicate on it.

The claimant is suing the UK for the revenue it could have earned if the mine had been permitted to go ahead. Citizens have no idea how much this might be. What legal team is serving as its counsel against the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The administration passes a law, the high court upholds it, then a foreign company contests it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Case

On the same day that the panel on the coalmine case was convened, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. We know nothing of the case at present, but it seems likely that he’ll use the ISDS mechanism to contest the restrictions the UK imposed on him subsequent to the invasion of Ukraine. He has previously initiated proceedings against another European state on these grounds, claiming a colossal sum: equivalent to half of government’s annual revenue. Among the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This remarkable, secretive influence over sovereign states could be blocking the finance Ukraine critically depends on.

False Assurances and Growing Costs

We were assured that these scenarios could not occur. Previously, a government leader, championing the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An expert on this issue described activists of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations needed to fear ISDS claims. Warnings that “as corporations start to realise the power they now possess, they will redirect their efforts from the vulnerable countries to the developed economies” were greeted by general mockery.

That warning has come to pass. This year, oil and gas and mining firms have filed a historic level of suits against nations rich and poor, contesting – as in the case of the UK mine – government attempts to halt environmental catastrophe. Firms have so far won vast sums through ISDS, of which oil majors have been awarded $84bn. That represents the combined GDP