Hello, Foreign Tycoons and Companies! Kindly Come and Litigate Against the UK for Billions of Pounds.

How do you understand our political system functions? Maybe along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is maintained by the courts. That's it. Well, that’s how it used to work. No longer.

The Advent of Shadow Arbitration Panels

In the modern era, international firms, or the wealthy individuals that control them, are able to litigate against elected administrations for the laws they pass, at private courts staffed by business advocates. Such disputes are held in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or legal review. Ordinary citizens are unable to file a case to them, and neither can our government, or even businesses operating from this country. They are open only to entities registered abroad.

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

These awards constitute not tangible damages but funds the tribunal officials conclude the company could potentially have made. The state may have to abandon its policy. It becomes discouraged from enacting future policies in that area, due to the risk of being sued.

A System Running Rampant

Record numbers of disputes are being initiated, as corporations learn from each other, and private equity bankroll lawsuits for a share of a share of the settlements. The result? Democratic sovereignty and popular rule are becoming unaffordable.

The process is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the choices enacted by parliaments is that this provision has been inserted – without public consent, and typically amid conditions of extreme secrecy – inside bilateral investment treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The judge ruled that plans to dig the first major coal mine in the UK for a generation, in Cumbria, were illegally sanctioned by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government then withdrew the licence the Tories had granted. Today, this success could be compromised by an offshore tribunal answering to no one but the corporations filing the suit.

In August, a company whose ultimate owners are based in the tax haven filed a lawsuit challenging the UK government. Last week a dispute settlement body in the United States was convened to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been allowed to go ahead. The public has no idea how much this sum represents. Who is serving as its counsel in opposition to the British government? An elected representative, and ex-law officer in the outgoing administration, the self-proclaimed patriot Geoffrey Cox. The administration enacts a policy, the high court upholds it, then a foreign company disputes it through an secretive private court, and a member of our parliament works for its behalf.

A Sanctions Case

Simultaneously that the court on the coal mine dispute was appointed, it was revealed from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it is highly possible that he will utilise the arbitration process to challenge the restrictions the UK imposed on him subsequent to the Russian aggression. He has already started suing a small nation for this reason, seeking sixteen billion dollars: half that government’s annual revenue. Part of the counsel on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s delay in utilising seized Russian assets as collateral for its loan to Ukraine is due to Belgium’s fear that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, unaccountable authority over sovereign states might be preventing the money Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these scenarios could not occur. Previously, a former prime minister, promoting the most significant and hazardous of all such treaties, declared: “The UK has signed trade agreement upon trade deal and we have never seen a problem in the past.” An adviser on this matter labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the power they now possess, they will turn their attention from the vulnerable countries to the strong ones” were met with general mockery.

That threat is now a reality. This year, energy and mining firms have initiated a historic level of claims against nations both wealthy and developing, contesting – as in the case of the Whitehaven project – official measures to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP