Hello, Foreign Oligarchs and Firms! Kindly Proceed and Sue the UK for Billions.

How do you understand our system of government operates? Maybe along the lines of this. The public votes for MPs. They vote on bills. Should a majority is achieved, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Well, that was how it once functioned. No longer.

The Emergence of Offshore Tribunals

In the modern era, overseas companies, or the billionaires who own them, have the power to sue governments for the policies they pass, at secret arbitration panels staffed by business advocates. Such disputes take place behind closed doors. Differing from national judiciaries, these bodies provide no opportunity to appeal or oversight by judges. The general public are unable to file a case to them, just as our government, or even companies based in this country. The door is open only to entities operating from foreign soil.

Should an arbitration panel rules that a law or policy could harm the corporation’s expected profits, it has the power to grant compensation of hundreds of millions, even billions.

These sums represent not real financial harm but money the tribunal officials determine the company would perhaps have made. The state could be forced to drop the legislation. It will be discouraged from introducing similar legislation of a similar nature, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Record numbers of legal actions are being initiated, as corporations learn from each other, and private equity finance suits in return for a share of the takings. The consequence? Democratic sovereignty and democratic governance are turning into too costly.

The process is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to trump domestic law and the rulings taken by legislatures is that this stipulation has been written – without democratic mandate, and often in a climate of profound opacity – within international trade agreements.

A Real-World Instance: The Whitehaven Coal Mine

A year ago, a conservation group secured a significant win at the high court. The judge found that proposals to open the first deep coalmine in the UK for three decades, in northwest England, were found to be unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had zero effect on climate commitments. The incoming administration later cancelled the licence the Tories had issued. Now, this legal outcome is under threat by an foreign court accountable to exclusively the corporations bringing the case.

During August, a firm whose final controllers are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a arbitration panel in Washington DC was set up to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to commence operations. Citizens have little idea how much this sum represents. What legal team is serving as its counsel challenging the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

A Sanctions Case

Concurrently that the panel on the mining lawsuit was established, information emerged from a government response that the UK is also being sued under ISDS by a Russian oligarch, an oligarch. We know scarce of the case to date, but it appears probable that he’ll use the tribunal to challenge the sanctions the UK levied against him following the Russian aggression. He has previously filed a claim against Luxembourg with similar intent, demanding $16bn: half that state's annual revenue. Among the lawyers representing him there? the wife of a former prime minister, spouse of the previous PM.

Legal experts argue that the EU’s hesitation in leveraging immobilised Russian assets as security for its financial support package arises from concerns within Belgium that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the finance Ukraine urgently requires.

Misleading Claims and Mounting Risks

We were assured that these scenarios were not possible. In 2014, a senior politician, advocating for the largest and riskiest of all investment pacts, declared: “We’ve signed investment treaty after trade deal and there has not been a issue in the past.” A consultant on this matter labelled critics of “scaremongering … in reality, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by ISDS claims. Predictions that “once firms begin to understand the power they’ve been granted, they will shift their focus from the vulnerable countries to the strong ones” were greeted by scepticism.

That threat is now a reality. Recently, fossil fuel and mining firms have filed a unprecedented number of cases against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have so far won one hundred and fourteen billion dollars through ISDS, of which fossil fuel companies have obtained the majority. That represents the combined GDP