Welcome, Foreign Oligarchs and Firms! Please Proceed and Take Legal Action Against the UK for Billions of Pounds.

How do you understand our political system functions? It could be similar to this. We elect MPs. They legislate on bills. If a majority is secured, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Yet, that’s how it operated in the past. Those days are over.

The Emergence of Secret Courts

Today, overseas companies, or the wealthy individuals behind them, have the power to sue elected administrations for the regulations they pass, at private courts composed of business advocates. These proceedings take place in secret. Differing from national judiciaries, these tribunals grant no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, including businesses operating from this country. They are open only to businesses operating from foreign soil.

If a tribunal determines that a law or policy could harm the corporation’s projected profits, it may order damages of vast sums, even billions.

This compensation constitute not tangible damages but funds the tribunal officials determine the company could potentially have made. The administration may have to drop the legislation. It is discouraged from introducing similar legislation along the same lines, for fear of being sued.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as corporations observe each other, and hedge funds bankroll lawsuits for a share of a cut of the takings. The consequence? Democratic sovereignty and democratic governance are becoming prohibitively expensive.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede domestic law and the decisions taken by parliaments is that this clause has been incorporated – without democratic mandate, and typically amid an atmosphere of profound opacity – inside bilateral investment treaties.

A Specific Example: The Cumbrian Coal Mine

A year ago, environmental campaigners achieved a major legal triumph at the High Court. The presiding officer found that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, had been unlawfully approved by the outgoing administration, which had agreed to the extraordinary assertion that the mine would have had zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the previous administration had granted. Currently, this victory is under threat by an foreign court reporting to only the corporations filing the suit.

Last August, a company whose beneficial owners reside in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to adjudicate on it.

The company is litigating against the UK for the revenue it might have made if the mine had been allowed to proceed. The public has little idea how much this sum represents. Who is representing it challenging the British government? An elected representative, and previous senior legal advisor in the previous government, the self-proclaimed patriot the MP. The state enacts a policy, the national judiciary validates it, then a international entity challenges it through an undemocratic offshore tribunal, and a elected official works for its behalf.

A Sanctions Challenge

On the same day that the court on the mining lawsuit was established, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, a sanctioned individual. Details are nothing of the case to date, but it appears probable that he’ll use the tribunal to fight the sanctions the UK enacted against him following the invasion of Ukraine. He has previously started suing another European state with similar intent, demanding a colossal sum: equivalent to half of government’s annual revenue. Among the lawyers representing him there? a prominent lawyer, wife of the former British prime minister.

Trade specialists believe that the EU’s hesitation in using frozen oligarchs' funds as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the offshore corporate courts, under a trade agreement. This unprecedented, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

Misleading Claims and Escalating Threats

Politicians promised that these scenarios could not occur. In 2014, a senior politician, championing the most significant and hazardous of all such treaties, told us: “The UK has signed trade deal upon trade deal and we have never seen a case in the past.” An expert on this issue labelled campaigners of “exaggeration … in reality, ISDS does not affect the UK much”. The overall message seemed to be that solely developing countries should be concerned by ISDS claims. Warnings that “as corporations grasp the power they now possess, they will shift their focus from the vulnerable countries to the developed economies” were dismissed with widespread derision.

That warning is now a reality. In the current period, energy and mining firms have lodged a record number of claims against nations both wealthy and developing, contesting – similar to the Whitehaven project – government attempts to halt climate breakdown. Companies have thus far won vast sums through ISDS, of which energy giants have secured $84bn. That equates to the combined GDP