Hello, Overseas Oligarchs and Companies! Please Proceed 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 obtained, the bills pass into law. The law is upheld by the courts. Simple as that. Yet, that was how it operated in the past. No longer.

The Emergence of Secret Arbitration Panels

Nowadays, overseas companies, and the oligarchs who own them, can sue governments for the policies they pass, at secret arbitration panels composed of corporate lawyers. Such disputes take place behind closed doors. Unlike our courts, these tribunals allow no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, including companies headquartered in this country. The door is open exclusively to businesses registered abroad.

Should an arbitration panel rules that a government measure may compromise the corporation’s anticipated profits, it may order compensation of vast sums, potentially billions.

These awards represent not real financial harm but compensation the arbitrators decide the company would perhaps have made. The administration could be forced to rescind the measure. It becomes hesitant to passing future laws along the same lines, worried about facing litigation.

A Process Running Rampant

Historically high figures of cases are being brought, as companies observe each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The outcome? Democratic sovereignty and democracy are turning into prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the choices made by elected bodies is that this provision has been written – without public consent, and frequently under conditions of extreme secrecy – within trade treaties.

A Concrete Example: The UK Coal Mine

A year ago, environmental campaigners secured a significant win at the senior court. The presiding officer found that plans to dig the first major coal mine in the UK for 30 years, in northwest England, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the permission the Tories had issued. Currently, this legal outcome faces being overturned by an foreign court reporting to only the corporations filing the suit.

In August, a corporate entity whose final controllers are based in the offshore financial centre filed a lawsuit against the UK government. Recently a arbitration panel in Washington DC was convened to consider the case.

The company is suing the UK for the money it might have made if the mine had been permitted to proceed. The public has no clear indication how much this sum represents. What legal team is serving as its counsel challenging the state? An elected representative, and former attorney-general in the Conservative government, the noted patriot Geoffrey Cox. The state makes a decision, the domestic court validates it, then a international entity disputes it through an unaccountable private court, and a sitting MP works for its behalf.

The Russian Case

On the same day that the court on the coal mine dispute was convened, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, an oligarch. We know little of the case so far, but it appears probable that he will utilise the ISDS mechanism to fight the penalties the UK imposed on him after the Russian aggression. He has already started suing a small nation for this reason, demanding sixteen billion dollars: half that state's yearly budget. Among the counsel representing him there? a prominent lawyer, married to the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised oligarchs' funds as security for its aid for Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Risks

The public was told 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 trade deal after trade deal and we have never seen a issue in the past.” An adviser on this issue described campaigners of “scaremongering … the truth is, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “as corporations start to realise the authority bestowed upon them, they will redirect their efforts from the weak nations to the developed economies” were met with general mockery.

That warning has come to pass. Recently, oil and gas and resource corporations have initiated a unprecedented number of cases against nations rich and poor, challenging – similar to the Cumbrian coalmine – official measures to halt global warming. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have secured the majority. That equates to the combined GDP