Hello, Foreign Oligarchs and Corporations! Please Come and Take Legal Action Against the UK for Vast Sums.

Can you reckon our political system functions? Perhaps along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is maintained by the courts. End of story. Well, that used to be how it once functioned. No longer.

The Advent of Offshore Arbitration Panels

Nowadays, international firms, and the billionaires behind them, can sue elected administrations for the laws they pass, at offshore tribunals made up of business advocates. The cases are held in secret. Differing from national judiciaries, these panels grant no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, or even companies headquartered in this country. They are open only to businesses registered abroad.

If a tribunal rules that a government measure may compromise the corporation’s expected profits, it may order damages of hundreds of millions of pounds, potentially billions.

This compensation represent not actual losses but compensation the tribunal officials determine the company would perhaps have made. The state could be forced to rescind the measure. It will be hesitant to enacting future policies of a similar nature, for fear of facing litigation.

A Mechanism Growing Exponentially

Historically high figures of disputes are being brought, as corporations observe each other, and hedge funds fund legal actions in return for a share of the settlements. The result? Sovereignty and popular rule are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The rationale it is permitted to trump a country's own laws and the choices taken by legislatures is that this provision has been incorporated – absent public approval, and typically amid conditions of extreme secrecy – within trade treaties.

A Concrete Case: The Whitehaven Coal Mine

Twelve months ago, a conservation group secured a significant win at the High Court. The judge determined that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were wrongly permitted by the Conservative government, which had accepted the questionable argument that the mine would have no consequence on our carbon budgets. The incoming administration then withdrew the consent the Tories had approved. Currently, this legal outcome is under threat by an offshore tribunal answering to only the corporations petitioning it.

In August, a firm whose final controllers are located in the offshore financial centre initiated proceedings challenging the UK government. Last week a arbitration panel in the United States was established to consider the case.

This firm is litigating against the UK for the profits it would have generated if the mine had been permitted to proceed. The public has little idea how much this sum represents. Which individual is representing it in opposition to the British government? An elected representative, and ex-law officer in the previous government, the noted patriot Sir Geoffrey Cox. The state makes a decision, the high court upholds it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Case

Simultaneously that the tribunal on the mining lawsuit was appointed, we learned from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows nothing of the case to date, but it seems likely that he’ll use the tribunal to challenge the penalties the UK imposed on him subsequent to the war in Ukraine. He has initiated proceedings against another European state for this reason, demanding a colossal sum: equivalent to half of government’s annual revenue. Among the counsel representing him there? the wife of a former prime minister, married to the previous PM.

Trade specialists believe that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its aid for Ukraine is due to concerns within Belgium that it could be sued in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine urgently requires.

Empty Promises and Escalating Risks

Politicians promised that these events were not possible. In 2014, a government leader, advocating for the biggest and most dangerous of all investment pacts, declared: “The UK has signed investment treaty after trade deal and there has never been a issue in the past.” An adviser on this matter described campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The prevailing narrative was crafted to be that solely developing countries had to worry about these lawsuits. Cautionary notes that “once firms begin to understand the influence they’ve been granted, they will turn their attention from the poorer states to the developed economies” were dismissed with widespread derision.

That threat has now materialised. Recently, fossil fuel and mining firms have initiated a record number of suits against nations both wealthy and developing, challenging – similar to the Whitehaven project – state efforts to prevent climate breakdown. Corporations have thus far won vast sums through ISDS, of which energy giants have been awarded eighty-four billion dollars. That equates to the combined GDP