Welcome, Foreign Oligarchs and Corporations! Please Proceed and Take Legal Action Against the UK for Vast Sums.

Can you reckon our democratic process functions? It could be something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Legislation are enforced by the courts. That's it. Yet, that was how it operated in the past. Those days are over.

The Rise of Shadow Arbitration Panels

In the modern era, international firms, along with the oligarchs that control them, are able to litigate against nation states for the regulations they pass, at private courts staffed by business advocates. Such disputes take place away from public scrutiny. Differing from national judiciaries, these panels grant no avenue for appeal or judicial review. The general public are unable to file a case to them, nor can our government, including enterprises operating from this country. Access is granted only to entities registered abroad.

When a secret court rules that a legislative action could harm the corporation’s expected profits, it may order compensation of vast sums, even billions.

These awards represent not real financial harm but compensation the arbitrators decide the company might otherwise have made. The state could be forced to drop the legislation. It is hesitant to introducing similar legislation of a similar nature, for fear of facing litigation.

A Mechanism Running Rampant

Record numbers of legal actions are being filed, as firms observe each other, and investment funds fund legal actions in return for a share of the awards. The result? National sovereignty and democratic governance are now too costly.

The system is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to override a country's own laws and the choices enacted by elected bodies is that this stipulation has been written – without democratic mandate, and often in a climate of extreme secrecy – within bilateral investment treaties.

A Concrete Case: The Cumbrian Coalmine

Twelve months ago, a conservation group achieved a major legal triumph at the senior court. The presiding officer ruled that plans to open the first new deep coal mine in the UK for three decades, in Cumbria, had been unlawfully approved by the outgoing administration, which had endorsed the bizarre claim that the mine would have had no impact on national carbon targets. The incoming administration then withdrew the consent the Tories had approved. Today, this success faces being overturned by an foreign court answering to exclusively the corporations petitioning it.

Last August, a company whose beneficial owners are based in the offshore financial centre lodged a claim versus the UK government. Last week a arbitration panel in Washington DC was established to consider the case.

This firm is litigating against the UK for the profits it could have earned if the mine had been permitted to proceed. Citizens have no idea how much this could amount to. Which individual is acting on its behalf in opposition to the UK administration? A member of parliament, and ex-law officer in the Conservative government, the self-proclaimed patriot the MP. The administration makes a decision, the domestic court validates it, then a foreign company contests it through an unaccountable private court, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the tribunal on the coalmine case was established, information emerged from a parliamentary answer that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. The public knows little of the case to date, but it appears probable that he will utilise the tribunal to challenge the restrictions the UK levied against him following the Russian aggression. He has filed a claim against a small nation with similar intent, claiming $16bn: equivalent to half of government’s yearly budget. Included in the lawyers representing him there? a prominent lawyer, spouse of the former British prime minister.

International law scholars contend that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine is due to concerns within Belgium that it could be subject to litigation in the offshore corporate courts, under a bilateral investment treaty. This unprecedented, undemocratic power over elected governments may be obstructing the funds Ukraine urgently requires.

Misleading Claims and Escalating Threats

We were assured that such things were not possible. Years ago, a government leader, championing the biggest and most dangerous of all these agreements, told us: “We’ve signed investment treaty upon trade deal and there has not been a issue in the past.” An expert on this topic accused critics of “scaremongering … the fact is, ISDS does not affect the UK much”. The overall message appeared to be that exclusively weaker states should be concerned by such legal actions. Cautionary notes that “once firms begin to understand the power they now possess, they will shift their focus from the weak nations to the strong ones” were dismissed with widespread derision.

That prediction has now materialised. Recently, fossil fuel and mining firms have filed a historic level of claims against nations rich and poor, contesting – similar to the UK mine – government attempts to stop environmental catastrophe. Corporations have thus far won $114bn via ISDS, of which energy giants have been awarded $84bn. That is equivalent to the combined GDP