Greetings, International Oligarchs and Companies! Please Come and Take Legal Action Against the UK for Billions of Pounds.

How do you perceive our system of government functions? Perhaps along the lines of this. Citizens choose MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. The law is upheld by the courts. That's it. Well, that used to be how it once functioned. Not anymore.

The Advent of Shadow Arbitration Panels

Nowadays, overseas companies, and the billionaires behind them, can sue elected administrations for the laws they pass, at private courts staffed by corporate lawyers. The cases are conducted in secret. In contrast to domestic courts, these tribunals grant no avenue for appeal or legal review. You or I are barred from bringing a case to them, just as our government, or even enterprises based in this country. The door is open exclusively to corporations registered abroad.

When a secret court rules that a government measure might diminish the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These awards constitute not tangible damages but funds the tribunal officials decide the company could potentially have made. The state may have to rescind the measure. It will be deterred from enacting future policies of a similar nature, for fear of being sued.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as corporations learn from each other, and hedge funds finance suits in exchange for a cut of the settlements. The outcome? Sovereignty and popular rule are now too costly.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the decisions taken by legislatures is that this clause has been written – without democratic mandate, and frequently under conditions of extreme secrecy – into trade treaties.

A Concrete Case: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the senior court. The presiding officer found that plans to open the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the previous government, which had accepted the extraordinary assertion that the mine would have no consequence on climate commitments. The Labour government subsequently revoked the consent the previous administration had issued. Now, this victory is under threat by an offshore tribunal reporting to exclusively the companies bringing the case.

In August, a company whose final controllers reside in the tax haven lodged a claim against the UK government. Recently a dispute settlement body in the United States was set up to hear it.

The company is litigating against the UK for the profits it might have made if the mine had been permitted to proceed. We have no clear indication how much this could amount to. What legal team is acting on its behalf in opposition to the UK administration? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a foreign company contests it through an undemocratic private court, and a member of our parliament represents its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was appointed, we learned from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, a sanctioned individual. Details are little of the case to date, but it is highly possible that he’ll use the arbitration process to challenge the restrictions the UK imposed on him following the invasion of Ukraine. He has already started suing another European state with similar intent, claiming a colossal sum: half that government’s annual revenue. Among the counsel on his side? the wife of a former prime minister, spouse of the ex-UK leader.

Trade specialists contend that the EU’s delay in using frozen Russian assets as security for its financial support package is due to apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the finance Ukraine desperately needs.

Misleading Claims and Escalating Costs

The public was told that such things were not possible. Years ago, a former prime minister, championing the largest and riskiest of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has not been a case in the past.” An expert on this matter labelled activists of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative appeared to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “once firms start to realise the power they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were met with general mockery.

That warning has now materialised. Recently, energy and mining firms have initiated a unprecedented number of cases against nations across the economic spectrum, contesting – similar to the UK mine – state efforts to halt climate breakdown. Companies have thus far won $114bn by using ISDS, of which oil majors have obtained $84bn. That represents the combined GDP