Welcome, International Magnates and Companies! Please Proceed and Litigate Against the UK for Billions.

What is your perceive our system of government operates? Perhaps similar to this. We elect MPs. They legislate on bills. When a majority is obtained, the bills become law. The law are enforced by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Rise of Offshore Courts

In the modern era, international firms, or the wealthy individuals who own them, can sue nation states for the laws they pass, at private courts composed of corporate lawyers. The cases are held behind closed doors. Unlike our courts, these tribunals grant no right of appeal or legal review. You or I are unable to file a case to them, and neither can our government, or even enterprises based in this country. They are open solely for corporations registered abroad.

If a tribunal determines that a legislative action might diminish the corporation’s expected profits, it may order compensation of hundreds of millions, running into billions.

These sums constitute not actual losses but funds the arbitrators decide the company might otherwise have made. The government could be forced to drop the legislation. It becomes deterred from passing future laws of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of disputes are being filed, as corporations observe each other, and private equity bankroll lawsuits in return for a share of the settlements. The consequence? Sovereignty and democracy are becoming unaffordable.

The system is called “investor-state dispute settlement” (ISDS). The reason it is permitted to trump a country's own laws and the decisions made by legislatures is that this stipulation has been incorporated – absent public approval, and often in conditions of total confidentiality – into bilateral investment treaties.

A Real-World Case: The UK Coalmine

Twelve months ago, activists secured a significant win at the senior court. The presiding officer ruled that schemes to open the first deep coalmine in the UK for 30 years, in northwest England, were wrongly permitted by the Conservative government, which had accepted the bizarre claim that the mine would have zero effect on national carbon targets. The incoming administration then withdrew the permission the previous administration had approved. Now, this victory faces being overturned by an secret arbitration panel answering to no one but the companies bringing the case.

In August, a firm whose ultimate owners reside in the Cayman Islands lodged a claim versus the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The company is litigating against the UK for the revenue it could have earned if the mine had been permitted to proceed. Citizens have little idea how much this could amount to. Who is representing it challenging the British government? A sitting MP, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The government passes a law, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a elected official acts on its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the mining lawsuit was convened, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case to date, but it is highly possible that he may employ the arbitration process to challenge the sanctions the UK levied against him subsequent to the war in Ukraine. He has initiated proceedings against Luxembourg for this reason, seeking sixteen billion dollars: half that nation's annual revenue. Included in the counsel on his side? a prominent lawyer, spouse of the previous PM.

Trade specialists contend that the EU’s hesitation in utilising seized Russian assets as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a trade agreement. This unprecedented, secretive influence over elected governments could be blocking the finance Ukraine desperately needs.

False Assurances and Escalating Risks

Politicians promised that these events could not occur. Years ago, a government leader, promoting the largest and riskiest of all such treaties, declared: “We’ve signed trade deal upon trade deal and there has not been a issue in the past.” An expert on this topic labelled critics of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression seemed to be that only poorer nations had to worry about such legal actions. Predictions that “when companies begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the developed economies” were greeted by widespread derision.

That prediction is now a reality. In the current period, energy and mining firms have lodged a unprecedented number of claims against nations rich and poor, contesting – like the example of the Cumbrian coalmine – official measures to stop environmental catastrophe. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That equates to the combined GDP