Welcome, Foreign Oligarchs and Corporations! Kindly Come and Litigate Against the UK for Billions of Pounds.

Can you perceive our system of government functions? It could be similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. However, that used to be how it used to work. Not anymore.

The Emergence of Offshore Tribunals

Today, foreign corporations, along with the wealthy individuals behind them, have the power to sue governments for the laws they pass, at secret arbitration panels made up of business advocates. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. You or I cannot take a case to them, and neither can our government, or even enterprises operating from this country. They are open solely for businesses based overseas.

When a secret court finds that a law or policy may compromise the corporation’s anticipated profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not real financial harm but money the tribunal officials conclude the company would perhaps have made. The state may have to drop the legislation. It will be deterred from passing future laws in that area, due to the risk of facing litigation.

A System Running Rampant

Record numbers of disputes are being brought, as firms learn from each other, and hedge funds fund legal actions for a share of a portion of the awards. The outcome? Sovereignty and popular rule are turning into unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is allowed to supersede a country's own laws and the rulings taken by elected bodies is that this clause has been incorporated – without public consent, and frequently under conditions of extreme secrecy – into trade treaties.

A Specific Instance: The Whitehaven Coalmine

A year ago, activists secured a significant win at the high court. The judge ruled that plans to dig the first new deep coal mine in the UK for a generation, at Whitehaven in Cumbria, were wrongly permitted by the outgoing administration, which had agreed to the questionable argument that the mine would have no consequence on national carbon targets. The Labour government later cancelled the consent the previous administration had approved. Today, this success is under threat by an secret arbitration panel reporting to only the entities petitioning it.

In August, a company whose final controllers reside in the Cayman Islands lodged a claim challenging the UK government. Last week a arbitration panel in the United States was convened to adjudicate on it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been allowed to proceed. We have no clear indication how much this could amount to. Which individual is acting on its behalf in opposition to the British government? A sitting MP, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The government passes a law, the domestic court validates it, then a foreign company disputes it through an secretive offshore tribunal, and a sitting MP represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was established, we learned from a parliamentary answer that the UK is subject to further litigation under ISDS by a Russian oligarch, an oligarch. Details are little of the case to date, but it appears probable that he will utilise the tribunal to fight the penalties the UK levied against him subsequent to the Russian aggression. He has started suing Luxembourg for this reason, demanding sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the legal team on his side? a prominent lawyer, married to the former British prime minister.

Trade specialists believe that the EU’s delay in leveraging immobilised state funds as guarantee for its financial support package stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a trade agreement. This extraordinary, secretive influence over sovereign states may be obstructing the money Ukraine critically depends on.

Misleading Claims and Mounting Costs

The public was told that such things wouldn’t happen. Years ago, a former prime minister, promoting the biggest and most dangerous of all investment pacts, declared: “The UK has signed trade deal upon trade deal and there has never been a issue in the past.” A consultant on this issue accused activists of “exaggeration … the fact is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about ISDS claims. Cautionary notes that “as corporations start to realise the authority bestowed upon them, they will turn their attention from the weak nations to the wealthy nations” were met with general mockery.

That warning is now a reality. This year, fossil fuel and resource corporations have initiated a unprecedented number of suits against nations across the economic spectrum, challenging – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have so far won vast sums via ISDS, of which oil majors have obtained the majority. That is equivalent to the combined GDP