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

How do you reckon our democratic process works? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills pass into law. The law are enforced by the courts. That's it. However, that’s how it once functioned. No longer.

The Emergence of Offshore Courts

Nowadays, foreign corporations, or the oligarchs who own them, can sue elected administrations for the regulations they pass, at private courts made up of business advocates. The cases are held away from public scrutiny. Differing from national judiciaries, these bodies grant no right of appeal or oversight by judges. Ordinary citizens cannot take a case to them, and neither can our government, or even businesses headquartered in this country. The door is open solely for businesses registered abroad.

Should an arbitration panel rules that a law or policy might diminish the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These sums are based not on actual losses but money the arbitrators decide the company would perhaps have made. The administration could be forced to rescind the measure. It will be deterred from introducing similar legislation of a similar nature, due to the risk of incurring a lawsuit.

A System Running Rampant

Record numbers of cases are being brought, as companies observe each other, and investment funds fund legal actions for a share of a cut of the settlements. The result? Democratic sovereignty and democracy are becoming too costly.

The process is known as “investor-state dispute settlement” (ISDS). The rationale it is permitted to override domestic law and the rulings enacted by legislatures is that this provision has been incorporated – absent public approval, and often in an atmosphere of total confidentiality – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

Last year, activists secured a significant win at the senior court. The judge found that schemes to dig the first major coal mine in the UK for three decades, in northwest England, were found to be unlawfully approved by the Conservative government, which had endorsed the extraordinary assertion that the mine would have no impact on national carbon targets. The Labour government then withdrew the licence the previous administration had approved. Now, this legal outcome could be compromised by an foreign court answering to only the corporations petitioning it.

Last August, a corporate entity whose beneficial owners are based in the Cayman Islands lodged a claim versus the UK government. Recently a tribunal in the US capital was set up to consider the case.

The claimant is suing the UK for the money it might have made if the mine had been allowed to proceed. We have no clear indication how much this might be. What legal team is serving as its counsel against the state? An elected representative, and previous senior legal advisor in the previous government, that great patriot the MP. The government enacts a policy, the national judiciary validates it, then a foreign company contests it through an undemocratic arbitration panel, and a sitting MP works for its behalf.

An Oligarch's Case

On the same day that the court on the coalmine case was established, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case so far, but it seems likely that he’ll use the tribunal to contest the penalties the UK levied against him following the invasion of Ukraine. He has initiated proceedings against another European state with similar intent, claiming $16bn: half that government’s yearly budget. Among the lawyers representing him there? Cherie Blair, spouse of the former British prime minister.

International law scholars argue that the EU’s delay in leveraging immobilised state funds as security for its aid for Ukraine stems from concerns within Belgium that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, undemocratic power over sovereign states might be preventing the money Ukraine desperately needs.

Empty Promises and Mounting Threats

The public was told that these events wouldn’t happen. Previously, a former prime minister, championing the most significant and hazardous of all these agreements, declared: “Britain has agreed to investment treaty after trade deal and there has not been a case in the past.” A consultant on this issue described activists of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message appeared to be that solely developing countries had to worry about ISDS claims. Cautionary notes that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the weak nations to the wealthy nations” were greeted by general mockery.

That prediction has now materialised. In the current period, energy and mining firms have lodged a unprecedented number of cases against nations rich and poor, opposing – like the example of the UK mine – official measures to prevent global warming. Firms have to date won vast sums via ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP