Welcome, Foreign Tycoons and Firms! Please Come and Litigate Against the UK for Billions of Pounds.

How do you perceive our political system operates? Maybe along the lines of this. We elect MPs. They debate and pass bills. When a majority is obtained, the bills become law. Statutes is upheld by the courts. That's it. However, that’s how it used to work. Those days are over.

The Emergence of Secret Courts

Today, foreign corporations, along with the wealthy individuals who own them, are able to litigate against nation states for the policies they pass, at secret arbitration panels made up of business advocates. The cases take place in secret. Unlike our courts, these panels grant no opportunity to appeal or legal review. The general public cannot take a case to them, and neither can our government, or even companies based in this country. Access is granted solely for businesses operating from foreign soil.

If a tribunal rules that a legislative action could harm the corporation’s projected profits, it can award compensation of hundreds of millions, even billions.

These sums constitute not actual losses but funds the arbitrators conclude the company could potentially have made. The government could be forced to drop the legislation. It becomes deterred from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of disputes are being brought, as companies observe each other, and private equity fund legal actions in exchange for a cut of the takings. The consequence? Democratic sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the rulings enacted by parliaments is that this stipulation has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – into trade treaties.

A Concrete Example: The Cumbrian Coalmine

Last year, activists won a great victory at the High Court. The justice ruled that schemes to open the first major coal mine in the UK for 30 years, at Whitehaven in Cumbria, had been unlawfully approved by the outgoing administration, which had agreed to the questionable argument that the mine would have had zero effect on national carbon targets. The incoming administration then withdrew the permission the former government had approved. Today, this legal outcome is under threat by an foreign court answering to exclusively the companies filing the suit.

In August, a company whose beneficial owners are based in the tax haven lodged a claim against the UK government. Last week a arbitration panel in the US capital was convened to hear it.

The company is litigating against the UK for the profits it would have generated if the mine had been permitted to go ahead. The public has little idea how much this could amount to. Which individual is representing it in opposition to the state? An elected representative, and former attorney-general in the previous government, the noted patriot Geoffrey Cox. The administration enacts a policy, the national judiciary upholds it, then a international entity disputes it through an secretive offshore tribunal, and a member of our parliament acts on its behalf.

The Russian Case

Simultaneously that the panel on the coalmine case was appointed, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. The public knows little of the case to date, but it is highly possible that he’ll use the tribunal to contest the penalties the UK imposed on him subsequent to the Russian aggression. He has already started suing a small nation for this reason, demanding sixteen billion dollars: an amount representing half state's annual revenue. Included in the lawyers representing him there? a prominent lawyer, married to the ex-UK leader.

International law scholars believe that the EU’s delay in leveraging immobilised Russian assets as security for its aid for Ukraine stems from Belgium’s fear that it could be subject to litigation in the offshore corporate courts, under a investment pact. This remarkable, unaccountable authority over sovereign states might be preventing the money Ukraine desperately needs.

Misleading Claims and Mounting Costs

We were assured that these scenarios wouldn’t happen. In 2014, a senior politician, advocating for the largest and riskiest of all such treaties, stated: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An expert on this issue labelled activists of “exaggeration … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “as corporations grasp the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were greeted by general mockery.

That warning has come to pass. Recently, fossil fuel and resource corporations have filed a record number of claims against nations across the economic spectrum, opposing – like the example of the Cumbrian coalmine – official measures to stop global warming. Companies have so far won one hundred and fourteen billion dollars via ISDS, of which oil majors have obtained the majority. That represents the combined GDP