Welcome, International Tycoons and Firms! Please Come and Take Legal Action Against the UK for Vast Sums.

How do you reckon our democratic process functions? Perhaps something like this. Citizens choose MPs. They debate and pass bills. Should a majority is achieved, the bills pass into law. The law is upheld by the courts. That's it. Well, that’s how it used to work. Not anymore.

The Emergence of Shadow Tribunals

In the modern era, international firms, along with the wealthy individuals that control them, are able to litigate against nation states for the policies they pass, at secret arbitration panels staffed by business advocates. These proceedings are conducted in secret. In contrast to domestic courts, these bodies allow no avenue for appeal or judicial review. You or I cannot take a case to them, just as our government, or even businesses headquartered in this country. Access is granted solely for businesses registered abroad.

Should an arbitration panel determines that a government measure might diminish the corporation’s projected profits, it has the power to grant compensation of hundreds of millions of pounds, potentially billions.

This compensation are based not on actual losses but compensation the arbitrators decide the company might otherwise have made. The government might be compelled to abandon its policy. It will be discouraged from passing future laws of a similar nature, due to the risk of being sued.

A System Spiralling Out of Control

Historically high figures of cases are being filed, as corporations take cues from each other, and private equity fund legal actions in return for a cut of the awards. The consequence? Sovereignty and democracy are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it can trump a country's own laws and the rulings made by legislatures is that this stipulation has been written – without democratic mandate, and often in conditions of profound opacity – into bilateral investment treaties.

A Real-World Instance: The UK Coal Mine

Last year, environmental campaigners achieved a major legal triumph at the high court. The justice ruled that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the Conservative government, which had endorsed the questionable argument that the mine could have no consequence on our carbon budgets. The incoming administration then withdrew the permission the former government had granted. Currently, this victory could be compromised by an secret arbitration panel accountable to only the corporations bringing the case.

In August, a company whose beneficial owners reside in the tax haven lodged a claim against the UK government. Last week a tribunal in the United States was convened to consider the case.

This firm is suing the UK for the profits it would have generated if the mine had been allowed to commence operations. We have no idea how much this might be. What legal team is representing it against the UK administration? A member of parliament, and ex-law officer in the outgoing administration, the self-proclaimed patriot the MP. The state passes a law, the domestic court supports it, then a overseas corporation challenges it through an unaccountable offshore tribunal, and a member of our parliament acts on its behalf.

An Oligarch's Case

Concurrently that the panel on the coal mine dispute was established, information emerged from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. Details are little of the case at present, but it seems likely that he’ll use the arbitration process to contest the restrictions the UK levied against him following the Russian aggression. He has started suing Luxembourg for this reason, claiming a colossal sum: an amount representing half nation's yearly income. Among the counsel representing him there? a prominent lawyer, married to the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized Russian assets as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This remarkable, unaccountable authority over sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Growing Risks

We were assured that these scenarios wouldn’t happen. Previously, a senior politician, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement after trade deal and there has never been a case in the past.” A consultant on this topic labelled campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the influence they’ve been granted, they will redirect their efforts from the weak nations to the strong ones” were greeted by widespread derision.

That threat is now a reality. Recently, fossil fuel and extraction companies have filed a record number of claims against nations both wealthy and developing, opposing – like the example of the Cumbrian coalmine – official measures to stop global warming. Firms have thus far won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded eighty-four billion dollars. That represents the combined GDP