Greetings, International Tycoons and Firms! Kindly Come and Litigate Against the UK for Billions of Pounds.

Can you understand our system of government works? It could be something like this. We elect MPs. They vote on bills. Should a majority is secured, the bills become law. Statutes is maintained by the courts. End of story. Yet, that used to be how it operated in the past. Not anymore.

The Rise of Shadow Tribunals

Nowadays, international firms, and the wealthy individuals behind them, are able to litigate against governments for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes are conducted in secret. In contrast to domestic courts, these tribunals grant no opportunity to appeal or oversight by judges. Ordinary citizens are barred from bringing a case to them, just as our government, or even businesses headquartered in this country. Access is granted solely for corporations operating from foreign soil.

Should an arbitration panel rules that a government measure may compromise the corporation’s expected profits, it can award damages of hundreds of millions, potentially billions.

This compensation constitute not tangible damages but funds the arbitrators decide the company would perhaps have made. The government could be forced to abandon its policy. It is discouraged from passing future laws along the same lines, due to the risk of being sued.

A Process Running Rampant

Historically high figures of legal actions are being filed, as firms learn from each other, and private equity fund legal actions for a share of a cut of the awards. The outcome? Sovereignty and democratic governance are turning into too costly.

This mechanism is called “investor-state dispute settlement” (ISDS). The rationale it can override a country's own laws and the rulings made by legislatures is that this stipulation has been inserted – absent public approval, and typically amid a climate of profound opacity – within trade treaties.

A Specific Example: The Cumbrian Coalmine

Twelve months ago, activists won a great victory at the High Court. The presiding officer determined that proposals to excavate the first major coal mine in the UK for 30 years, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the extraordinary assertion that the mine could have zero effect on our carbon budgets. The Labour government later cancelled the licence the former government had issued. Now, this success is under threat by an offshore tribunal answering to only the corporations filing the suit.

Last August, a corporate entity whose beneficial owners reside in the tax haven lodged a claim versus the UK government. Recently a arbitration panel in the US capital was established to hear it.

This firm is suing the UK for the money it might have made if the mine had been permitted to commence operations. The public has little idea how much this sum represents. Who is serving as its counsel challenging the UK administration? An elected representative, and ex-law officer in the previous government, the self-proclaimed patriot the MP. The state passes a law, the high court supports it, then a overseas corporation challenges it through an secretive arbitration panel, and a elected official acts on its behalf.

The Russian Case

Simultaneously that the tribunal on the coal mine dispute was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know nothing of the case to date, but it seems likely that he will utilise the arbitration process to fight the sanctions the UK imposed on him subsequent to the Russian aggression. He has already started suing a small nation for this reason, seeking sixteen billion dollars: equivalent to half of nation's yearly income. Included in the legal team acting for him in that case? Cherie Blair, spouse of the ex-UK leader.

International law scholars contend that the EU’s delay in using frozen oligarchs' funds as guarantee for its financial support package stems from Belgium’s fear that it could be taken to court in the secret arbitration panels, under a investment pact. This remarkable, undemocratic power over sovereign states may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Threats

Politicians promised that these scenarios wouldn’t happen. Years ago, a government leader, promoting the largest and riskiest of all such treaties, told us: “The UK has signed investment treaty after trade deal and we have never seen a case in the past.” A consultant on this issue labelled campaigners of “alarmism … the truth is, ISDS does not affect the UK much”. The general impression seemed to be that exclusively weaker states needed to fear such legal actions. Cautionary notes that “when companies start to realise the authority they now possess, they will redirect their efforts from the weak nations to the wealthy nations” were dismissed with scepticism.

That threat has come to pass. In the current period, oil and gas and resource corporations have lodged a record number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to prevent climate breakdown. Corporations have to date won $114bn by using ISDS, of which fossil fuel companies have been awarded $84bn. That is equivalent to the combined GDP