Hello, Overseas Magnates and Corporations! Please Come and Litigate Against the UK for Billions.

What is your understand our democratic process works? Perhaps along the lines of this. Citizens choose MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Rise of Offshore Courts

Today, international firms, or the wealthy individuals behind them, have the power to sue nation states for the laws they pass, at secret arbitration panels composed of corporate lawyers. These proceedings are conducted in secret. In contrast to domestic courts, these panels provide no avenue for appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, nor can our government, including enterprises based in this country. Access is granted solely for corporations based overseas.

Should an arbitration panel finds that a government measure might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions, even billions.

These sums constitute not actual losses but compensation the panel members decide the company would perhaps have made. The government may have to drop the legislation. It will be discouraged from passing future laws of a similar nature, due to the risk of incurring a lawsuit.

A Process Growing Exponentially

Unprecedented levels of legal actions are being filed, as corporations take cues from each other, and private equity finance suits in exchange for a portion of the takings. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override national legislation and the decisions made by parliaments is that this stipulation has been written – absent public approval, and frequently under a climate of profound opacity – into trade treaties.

A Specific Case: The Whitehaven Coal Mine

Twelve months ago, activists won a great victory at the High Court. The justice ruled that plans to open the first deep coalmine in the UK for 30 years, in Cumbria, were found to be wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have no impact on our carbon budgets. The Labour government subsequently revoked the consent the Tories had granted. Currently, this success faces being overturned by an secret arbitration panel accountable to no one but the entities bringing the case.

Last August, a company whose beneficial owners reside in the Cayman Islands filed a lawsuit against the UK government. Last week a tribunal in Washington DC was convened to consider the case.

This firm is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to commence operations. Citizens have little idea how much this sum represents. Which individual is serving as its counsel challenging the British government? A sitting MP, and previous senior legal advisor in the Conservative government, the noted patriot the MP. The government passes a law, the domestic court validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Challenge

Concurrently that the court on the coal mine dispute was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he will utilise the tribunal to contest the penalties the UK imposed on him after the Russian aggression. He has previously filed a claim against another European state for this reason, claiming a colossal sum: equivalent to half of government’s yearly budget. Included in the legal team acting for him in that case? the wife of a former prime minister, wife of the ex-UK leader.

Legal experts believe that the EU’s hesitation in utilising seized oligarchs' funds as security for its financial support package is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Escalating Risks

We were assured that these events wouldn’t happen. Years ago, a government leader, advocating for the largest and riskiest of all these agreements, declared: “We’ve signed trade agreement after trade deal and there has never been a issue in the past.” An adviser on this topic labelled campaigners of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states had to worry about these lawsuits. Cautionary notes that “when companies start to realise the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were dismissed with scepticism.

That threat is now a reality. This year, fossil fuel and resource corporations have filed a historic level of cases against nations both wealthy and developing, opposing – as in the case of the Whitehaven project – state efforts to halt environmental catastrophe. Companies have so far won $114bn through ISDS, of which oil majors have been awarded $84bn. That is equivalent to the combined GDP