Greetings, Overseas Magnates and Firms! Please Come and Sue the UK for Billions of Pounds.

Can you perceive our democratic process functions? It could be something like this. The public votes for MPs. They vote on bills. When a majority is secured, the bills are enacted as law. Legislation are enforced by the courts. End of story. Yet, that used to be how it once functioned. No longer.

The Rise of Secret Courts

In the modern era, international firms, or the oligarchs that control them, are able to litigate against governments for the regulations they pass, at private courts made up of corporate lawyers. These proceedings are conducted behind closed doors. Differing from national judiciaries, these bodies provide no right of appeal or judicial review. You or I are unable to file a case to them, just as our government, including businesses headquartered in this country. The door is open solely for corporations registered abroad.

Should an arbitration panel finds that a law or policy might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, even billions.

These sums constitute not actual losses but money the arbitrators decide the company could potentially have made. The administration could be forced to rescind the measure. It is discouraged from passing future laws of a similar nature, for fear of incurring a lawsuit.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being initiated, as companies learn from each other, and hedge funds fund legal actions in exchange for a share of the takings. The result? Sovereignty and popular rule are now prohibitively expensive.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump a country's own laws and the decisions taken by elected bodies is that this clause has been incorporated – without public consent, and typically amid a climate of total confidentiality – into bilateral investment treaties.

A Real-World Instance: The UK Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The justice found that schemes to excavate the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration then withdrew the consent the former government had issued. Now, this legal outcome is under threat by an foreign court reporting to exclusively the entities filing the suit.

In August, a corporate entity whose ultimate owners are based in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the US capital was set up to consider the case.

This firm is suing the UK for the revenue it might have made if the mine had received permission to proceed. We have little idea how much this might be. Which individual is serving as its counsel in opposition to the state? A member of parliament, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The government makes a decision, the national judiciary upholds it, then a foreign company challenges it through an undemocratic private court, and a sitting MP works for its behalf.

The Russian Case

Simultaneously that the court on the coal mine dispute was convened, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case at present, but it seems likely that he will utilise the arbitration process to contest the sanctions the UK enacted against him subsequent to the invasion of Ukraine. He has initiated proceedings against a small nation on these grounds, demanding sixteen billion dollars: an amount representing half nation's yearly income. Included in the lawyers on his side? the wife of a former prime minister, married to the previous PM.

Legal experts contend that the EU’s procrastination in using frozen Russian assets as security for its aid for Ukraine arises from apprehension in Brussels that it could be sued in the secret arbitration panels, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations could be blocking the finance Ukraine critically depends on.

False Assurances and Escalating Costs

The public was told that such things wouldn’t happen. In 2014, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “The UK has signed trade agreement after trade deal and there has not been a issue in the past.” An adviser on this matter labelled critics of “exaggeration … the truth is, ISDS barely touches the UK much”. The general impression was crafted to be that solely developing countries needed to fear these lawsuits. Cautionary notes that “once firms begin to understand the power they now possess, they will redirect their efforts from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction is now a reality. In the current period, fossil fuel and extraction companies have filed a record number of claims against nations rich and poor, contesting – like the example of the Whitehaven project – official measures to halt environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have obtained the majority. That equates to the combined GDP