Welcome, International Tycoons and Firms! Kindly Proceed and Litigate Against the UK for Billions.

Can you reckon our democratic process functions? Perhaps along the lines of this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that’s how it operated in the past. No longer.

The Advent of Shadow Tribunals

In the modern era, foreign corporations, and the oligarchs who own them, are able to litigate against governments for the policies they pass, at private courts composed of business advocates. These proceedings are conducted away from public scrutiny. Unlike our courts, these bodies grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including businesses based in this country. The door is open solely for businesses registered abroad.

When a secret court determines that a law or policy could harm the corporation’s expected profits, it can award damages of hundreds of millions of pounds, running into billions.

These awards are based not on real financial harm but funds the tribunal officials decide the company might otherwise have made. The government could be forced to abandon its policy. It becomes deterred from enacting future policies of a similar nature, for fear of being sued.

A Process Spiralling Out of Control

Historically high figures of legal actions are being initiated, as corporations observe each other, and investment funds fund legal actions in return for a portion of the settlements. The consequence? Democratic sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump national legislation and the decisions made by elected bodies is that this clause has been incorporated – absent public approval, and often in an atmosphere of extreme secrecy – into trade treaties.

A Real-World Case: The UK Coalmine

Last year, activists achieved a major legal triumph at the high court. The judge determined that schemes to open the first deep coalmine in the UK for three decades, at Whitehaven in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the questionable argument that the mine would have no impact on our carbon budgets. The new government later cancelled the consent the Tories had approved. Currently, this victory is under threat by an foreign court answering to exclusively the corporations petitioning it.

Last August, a company whose final controllers reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a dispute settlement body in the United States was set up to hear it.

The company is suing the UK for the revenue it would have generated if the mine had been allowed to go ahead. Citizens have no idea how much this might be. Which individual is acting on its behalf challenging the state? A member of parliament, and former attorney-general in the outgoing administration, that great patriot the MP. The administration enacts a policy, the national judiciary supports it, then a overseas corporation challenges it through an undemocratic private court, and a sitting MP acts on its behalf.

An Oligarch's Case

Concurrently that the tribunal on the coal mine dispute was convened, it was revealed from a parliamentary answer that the UK is subject to further litigation under ISDS by a wealthy Russian individual, an oligarch. The public knows little of the case at present, but it appears probable that he may employ the ISDS mechanism to challenge the sanctions the UK enacted against him following the Russian aggression. He has previously started suing a small nation with similar intent, seeking a colossal sum: an amount representing half nation's annual revenue. Included in the counsel acting for him in that case? Cherie Blair, wife of the former British prime minister.

International law scholars believe that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine is due to apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, undemocratic power over democratic administrations may be obstructing the money Ukraine critically depends on.

False Assurances and Growing Threats

Politicians promised that such things were not possible. Previously, a government leader, championing the biggest and most dangerous of all such treaties, told us: “Britain has agreed to trade deal after trade deal and there has not been a issue in the past.” An adviser on this issue labelled activists of “alarmism … the fact is, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Warnings that “once firms start to realise the authority they’ve been granted, they will redirect their efforts from the poorer states to the developed economies” were greeted by general mockery.

That warning has come to pass. Recently, energy and mining firms have filed a historic level of claims against nations rich and poor, challenging – as in the case of the Cumbrian coalmine – state efforts to halt global warming. Companies have thus far won $114bn through ISDS, of which oil majors have obtained eighty-four billion dollars. That equates to the combined GDP