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

What is your reckon our system of government functions? Maybe along the lines of this. We elect MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation is upheld by the courts. End of story. Well, that used to be how it operated in the past. Not anymore.

The Rise of Secret Courts

Today, overseas companies, and the billionaires behind them, can sue governments for the policies they pass, at private courts composed of business advocates. Such disputes are conducted in secret. Unlike our courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses headquartered in this country. Access is granted solely for entities registered abroad.

Should an arbitration panel determines that a law or policy might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, even billions.

These awards represent not tangible damages but funds the panel members decide the company could potentially have made. The administration could be forced to rescind the measure. It will be deterred from enacting future policies of a similar nature, worried about incurring a lawsuit.

A Mechanism Running Rampant

Historically high figures of legal actions are being brought, as corporations observe each other, and hedge funds bankroll lawsuits in return for a portion of the takings. The consequence? Democratic sovereignty and democratic governance are now prohibitively expensive.

The system is called “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings enacted by elected bodies is that this clause has been written – without democratic mandate, and often in an atmosphere of profound opacity – into international trade agreements.

A Real-World Case: The Whitehaven Coalmine

A year ago, environmental campaigners won a great victory at the high court. The judge determined that plans to dig the first deep coalmine in the UK for a generation, in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on climate commitments. The new government then withdrew the permission the Tories had approved. Today, this victory is under threat by an secret arbitration panel accountable to only the companies petitioning it.

In August, a corporate entity whose beneficial owners are located in the offshore financial centre filed a lawsuit versus the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. Citizens have no idea how much this might be. Who is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the domestic court supports it, then a international entity disputes it through an unaccountable private court, and a elected official works for its behalf.

The Russian Lawsuit

Simultaneously that the panel on the mining lawsuit was convened, we learned from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. Details are scarce of the case so far, but it seems likely that he’ll use the arbitration process to challenge the penalties the UK levied against him after the invasion of Ukraine. He has previously filed a claim against Luxembourg with similar intent, demanding sixteen billion dollars: equivalent to half of government’s yearly budget. Included in the lawyers on his side? the wife of a former prime minister, married to the former British prime minister.

Legal experts believe that the EU’s hesitation in leveraging immobilised state funds as guarantee for its financial support package arises from Belgium’s fear that it could be sued in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over sovereign states may be obstructing the money Ukraine critically depends on.

Empty Promises and Mounting Threats

We were assured that these events could not occur. Previously, a senior politician, championing the biggest and most dangerous of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has not been a issue in the past.” An adviser on this topic described activists of “scaremongering … the truth is, ISDS does not affect the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by such legal actions. Predictions that “as corporations begin to understand the power they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with general mockery.

That prediction has now materialised. Recently, fossil fuel and extraction companies have filed a historic level of claims against nations both wealthy and developing, challenging – like the example of the Cumbrian coalmine – state efforts to prevent environmental catastrophe. Companies have thus far won $114bn through ISDS, of which oil majors have secured $84bn. That equates to the combined GDP