Greetings, Foreign Tycoons and Firms! Please Come and Litigate Against the UK for Vast Sums.

Can you understand our political system functions? Perhaps something like this. We elect MPs. They legislate on bills. If a majority is obtained, the bills are enacted as law. Statutes is upheld by the courts. End of story. Yet, that’s how it once functioned. No longer.

The Rise of Shadow Courts

Today, overseas companies, or the oligarchs who own them, can sue elected administrations for the laws they pass, at private courts staffed by commercial attorneys. The cases are conducted in secret. Unlike our courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are unable to file a case to them, nor can our government, or even enterprises headquartered in this country. The door is open solely for entities operating from foreign soil.

When a secret court finds that a government measure might diminish the corporation’s expected profits, it can award financial penalties of hundreds of millions, even billions.

This compensation represent not real financial harm but funds the arbitrators decide the company would perhaps have made. The administration could be forced to abandon its policy. It becomes discouraged from passing future laws in that area, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being filed, as companies learn from each other, and hedge funds bankroll lawsuits for a share of a share of the settlements. The outcome? National sovereignty and democratic governance are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump a country's own laws and the choices taken by legislatures is that this stipulation has been written – without public consent, and often in conditions of profound opacity – within international trade agreements.

A Real-World Case: The Whitehaven Coalmine

Last year, activists won a great victory at the high court. The judge ruled that schemes to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have no impact on climate commitments. The incoming administration later cancelled the licence the previous administration had issued. Now, this victory could be compromised by an secret arbitration panel reporting to exclusively the companies bringing the case.

Last August, a company whose beneficial owners are located in the Cayman Islands filed a lawsuit challenging the UK government. Last week a tribunal in the US capital was set up to consider the case.

This firm is litigating against the UK for the profits it might have made if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. What legal team is representing it in opposition to the British government? A member of parliament, and previous senior legal advisor in the previous government, that great patriot the MP. The administration makes a decision, the high court supports it, then a foreign company disputes it through an secretive arbitration panel, and a elected official represents its behalf.

The Russian Case

Concurrently that the panel on the mining lawsuit was appointed, information emerged from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are scarce of the case at present, but it appears probable that he’ll use the ISDS mechanism to challenge the restrictions the UK enacted against him after the invasion of Ukraine. He has previously started suing Luxembourg for this reason, demanding a colossal sum: equivalent to half of nation's annual revenue. Among the legal team acting for him in that case? a prominent lawyer, married to the former British prime minister.

Trade specialists argue that the EU’s hesitation in using frozen Russian assets as security for its aid for Ukraine is due to apprehension in Brussels that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments might be preventing the money Ukraine urgently requires.

False Assurances and Escalating Threats

Politicians promised that these events wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all investment pacts, stated: “The UK has signed trade agreement after trade deal and there has not been a problem in the past.” A consultant on this topic described activists of “alarmism … in reality, ISDS barely touches the UK much”. The overall message seemed to be that exclusively weaker states should be concerned by these lawsuits. Cautionary notes that “as corporations start to realise the power bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with general mockery.

That warning has come to pass. This year, energy and extraction companies have initiated a record number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained the majority. That is equivalent to the combined GDP