Hello, Foreign Tycoons and Companies! Please Come and Litigate Against the UK for Vast Sums.

What is your reckon our system of government functions? Maybe something like this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is upheld by the courts. That's it. Yet, that’s how it once functioned. Not anymore.

The Emergence of Secret Courts

In the modern era, foreign corporations, along with the wealthy individuals behind them, are able to litigate against nation states for the regulations they pass, at offshore tribunals staffed by corporate lawyers. Such disputes take place in secret. Unlike our courts, these tribunals grant no avenue for appeal or legal review. Ordinary citizens are barred from bringing a case to them, just as our government, or even companies operating from this country. The door is open solely for entities operating from foreign soil.

When a secret court determines that a government measure could harm the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but compensation the tribunal officials decide the company would perhaps have made. The government might be compelled to rescind the measure. It is deterred from enacting future policies in that area, due to the risk of incurring a lawsuit.

A System Spiralling Out of Control

Unprecedented levels of legal actions are being filed, as companies observe each other, and investment funds finance suits in return for a cut of the settlements. The outcome? National sovereignty and popular rule are turning into too costly.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the choices taken by legislatures is that this provision has been inserted – without democratic mandate, and typically amid an atmosphere of extreme secrecy – inside international trade agreements.

A Concrete Instance: The Whitehaven Coal Mine

Twelve months ago, activists secured a significant win at the high court. The presiding officer determined that schemes to excavate the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the Conservative government, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The Labour government later cancelled the licence the former government had issued. Now, this success could be compromised by an secret arbitration panel accountable to exclusively the companies filing the suit.

During August, a company whose final controllers are based in the offshore financial centre lodged a claim against the UK government. Last week a arbitration panel in the United States was set up to consider the case.

The claimant is suing the UK for the profits it would have generated if the mine had been permitted to go ahead. Citizens have no clear indication how much this might be. What legal team is acting on its behalf against the state? A member of parliament, and former attorney-general in the previous government, the noted patriot the MP. The government passes a law, the high court validates it, then a international entity challenges it through an undemocratic arbitration panel, and a member of our parliament works for its behalf.

The Russian Challenge

On the same day that the tribunal on the coalmine case was convened, it was revealed from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. The public knows scarce of the case so far, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK imposed on him following the Russian aggression. He has already filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half government’s yearly income. Among the lawyers on his side? the wife of a former prime minister, wife of the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized oligarchs' funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Costs

We were assured that these scenarios were not possible. Previously, a former prime minister, promoting the most significant and hazardous of all these agreements, stated: “Britain has agreed to investment treaty after trade deal and there has not been a problem in the past.” An expert on this issue described critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “when companies begin to understand the power they’ve been granted, they will shift their focus from the poorer states to the strong ones” were met with general mockery.

That threat has come to pass. Recently, oil and gas and mining firms have initiated a record number of cases against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – government attempts to halt climate breakdown. Firms have so far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have obtained eighty-four billion dollars. That represents the combined GDP