Welcome, Foreign Oligarchs and Companies! Kindly Come and Sue the UK for Billions.

What is your reckon our system of government functions? Perhaps something like this. We elect MPs. They debate and pass bills. Should a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. However, that’s how it operated in the past. Those days are over.

The Advent of Secret Tribunals

Nowadays, overseas companies, along with the oligarchs who own them, can sue nation states for the regulations they pass, at private courts made up of commercial attorneys. Such disputes take place away from public scrutiny. In contrast to domestic courts, these panels grant no avenue for appeal or judicial review. Ordinary citizens are barred from bringing a case to them, nor can our government, or even businesses headquartered in this country. They are open solely for entities operating from foreign soil.

Should an arbitration panel determines that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions of pounds, even billions.

This compensation represent not actual losses but funds the arbitrators conclude the company could potentially have made. The administration may have to abandon its policy. It becomes discouraged from enacting future policies along the same lines, for fear of facing litigation.

A Process Running Rampant

Unprecedented levels of cases are being brought, as firms learn from each other, and private equity finance suits in exchange for a share of the settlements. The consequence? National sovereignty and popular rule are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The rationale it is allowed to supersede domestic law and the decisions enacted by parliaments is that this clause has been written – without public consent, and typically amid a climate of extreme secrecy – within trade treaties.

A Concrete Case: The UK Coal Mine

Twelve months ago, a conservation group secured a significant win at the high court. The justice ruled that proposals to excavate the first new deep coal mine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the previous government, which had agreed to the bizarre claim that the mine would have no impact on our carbon budgets. The Labour government later cancelled the licence the Tories had granted. Now, this success faces being overturned by an offshore tribunal answering to no one but the companies bringing the case.

Last August, a firm whose ultimate owners are located in the Cayman Islands filed a lawsuit versus the UK government. Last week a arbitration panel in the US capital was set up to hear it.

The company is litigating against the UK for the money it might have made if the mine had been permitted to commence operations. Citizens have no clear indication how much this might be. Who is representing it against the British government? A member of parliament, and former attorney-general in the outgoing administration, that great patriot Geoffrey Cox. The state enacts a policy, the domestic court supports it, then a international entity challenges it through an secretive offshore tribunal, and a elected official acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coalmine case was established, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, an oligarch. The public knows scarce of the case so far, but it seems likely that he may employ the arbitration process to fight the sanctions the UK levied against him after the Russian aggression. He has already filed a claim against another European state with similar intent, claiming $16bn: half that government’s yearly income. Part of the counsel representing him there? a prominent lawyer, married to the previous PM.

Trade specialists contend that the EU’s hesitation in leveraging immobilised Russian assets as collateral for its financial support package is due to Belgium’s fear that it could be subject to litigation in the secret arbitration panels, under a trade agreement. This unprecedented, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Misleading Claims and Growing Risks

Politicians promised that such things wouldn’t happen. In 2014, a government leader, promoting the biggest and most dangerous of all investment pacts, stated: “Britain has agreed to investment treaty after trade deal and there has never been a case in the past.” A consultant on this topic accused campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries should be concerned by ISDS claims. Cautionary notes that “when companies begin to understand the authority bestowed upon them, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That warning has come to pass. In the current period, energy and resource corporations have lodged a historic level of cases against nations both wealthy and developing, contesting – similar to the UK mine – government attempts to halt global warming. Corporations have so far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP