Hello, Foreign Tycoons and Firms! Please Proceed and Litigate Against the UK for Billions.

How do you perceive our system of government functions? Perhaps something like this. The public votes for MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Statutes are enforced by the courts. That's it. Well, that used to be how it operated in the past. Not anymore.

The Emergence of Secret Tribunals

In the modern era, international firms, and the billionaires that control them, have the power to sue governments for the regulations they pass, at offshore tribunals staffed by commercial attorneys. The cases are conducted away from public scrutiny. In contrast to domestic courts, these panels provide no opportunity to appeal or legal review. Ordinary citizens are barred from bringing a case to them, nor can our government, including businesses headquartered in this country. They are open exclusively to entities registered abroad.

When a secret court rules that a government measure could harm the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These sums represent not actual losses but funds the arbitrators determine the company might otherwise have made. The state might be compelled to abandon its policy. It will be hesitant to enacting future policies of a similar nature, due to the risk of facing litigation.

A Process Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies take cues from each other, and private equity fund legal actions for a share of a share of the awards. The result? Democratic sovereignty and democratic governance are now too costly.

The process is called “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings enacted by legislatures is that this clause has been incorporated – absent public approval, and typically amid conditions of total confidentiality – into bilateral investment treaties.

A Specific Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The presiding officer determined that plans to excavate the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine could have no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had granted. Currently, this success faces being overturned by an foreign court reporting to exclusively the corporations filing the suit.

During August, a corporate entity whose final controllers are based in the tax haven lodged a claim against the UK government. The previous week a tribunal in Washington DC was convened to hear it.

This firm is suing the UK for the money it could have earned if the mine had received permission to commence operations. The public has no clear indication how much this sum represents. Who is acting on its behalf challenging the UK administration? A sitting MP, and previous senior legal advisor in the previous government, that great patriot Sir Geoffrey Cox. The government enacts a policy, the high court validates it, then a overseas corporation disputes it through an secretive private court, and a sitting MP represents its behalf.

An Oligarch's Challenge

On the same day that the panel on the coalmine case was appointed, it was revealed from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are nothing of the case at present, but it is highly possible that he will utilise the tribunal to challenge the penalties the UK enacted against him following the war in Ukraine. He has previously filed a claim against Luxembourg with similar intent, seeking sixteen billion dollars: half that government’s yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the previous PM.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This remarkable, secretive influence over sovereign states may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

We were assured that these scenarios could not occur. Previously, a government leader, championing the largest and riskiest of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this issue described activists of “alarmism … the fact is, ISDS does not affect the UK much”. The general impression appeared to be that solely developing countries should be concerned by these lawsuits. Predictions that “once firms start to realise the influence they now possess, they will turn their attention from the weak nations to the strong ones” were met with general mockery.

That prediction has now materialised. Recently, oil and gas and mining firms have filed a historic level of cases against nations rich and poor, contesting – like the example of the UK mine – state efforts to prevent global warming. Firms have so far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have secured $84bn. That represents the combined GDP