Welcome, Foreign Oligarchs and Corporations! Please Proceed and Sue the UK for Vast Sums.

How do you reckon our democratic process works? Maybe something like this. Citizens choose MPs. They debate and pass bills. When a majority is obtained, the bills pass into law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. Not anymore.

The Emergence of Secret Courts

Today, overseas companies, along with the billionaires that control them, can sue nation states for the policies they pass, at secret arbitration panels made up of corporate lawyers. These proceedings are conducted behind closed doors. In contrast to domestic courts, these bodies provide no avenue for appeal or legal review. Ordinary citizens are unable to file a case to them, just as our government, including enterprises operating from this country. Access is granted solely for corporations registered abroad.

Should an arbitration panel finds that a legislative action could harm the corporation’s projected profits, it has the power to grant financial penalties of hundreds of millions of pounds, potentially billions.

These sums represent not actual losses but funds the arbitrators determine the company could potentially have made. The government might be compelled to drop the legislation. It is hesitant to passing future laws in that area, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Unprecedented levels of disputes are being filed, as corporations learn from each other, and hedge funds bankroll lawsuits for a share of a cut of the awards. The consequence? Sovereignty and popular rule are now prohibitively expensive.

The system is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to override national legislation and the choices made by elected bodies is that this clause has been incorporated – absent public approval, and frequently under conditions of total confidentiality – within trade treaties.

A Real-World Case: The Cumbrian Coal Mine

Last year, a conservation group won a great victory at the high court. The presiding officer found that proposals to open the first new deep coal mine in the UK for three decades, in northwest England, were unlawfully approved by the outgoing administration, which had accepted the extraordinary assertion that the mine would have had no consequence on national carbon targets. The new government then withdrew the permission the Tories had approved. Now, this legal outcome is under threat by an foreign court answering to only the companies filing the suit.

In August, a company whose final controllers reside in the offshore financial centre filed a lawsuit against the UK government. Last week a dispute settlement body in Washington DC was set up to adjudicate on it.

The claimant is suing the UK for the money it might have made if the mine had been permitted to commence operations. The public has no clear indication how much this sum represents. What legal team is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the outgoing administration, the noted patriot Sir Geoffrey Cox. The administration passes a law, the national judiciary validates it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament represents its behalf.

An Oligarch's Challenge

Simultaneously that the court on the coal mine dispute was established, we learned from a parliamentary answer that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case at present, but it is highly possible that he may employ the tribunal to challenge the restrictions the UK imposed on him after the invasion of Ukraine. He has already filed a claim against another European state on these grounds, seeking $16bn: equivalent to half of government’s yearly income. Included in the counsel on his side? a prominent lawyer, wife of the ex-UK leader.

Legal experts believe that the EU’s hesitation in using frozen state funds as security for its loan to Ukraine stems from 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 sovereign states could be blocking the finance Ukraine desperately needs.

Empty Promises and Mounting Costs

We were assured that such things could not occur. In 2014, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade deal after trade deal and there has not been a problem in the past.” An adviser on this topic accused activists of “scaremongering … the truth is, ISDS barely touches the UK much”. The prevailing narrative was crafted to be that only poorer nations should be concerned by such legal actions. Predictions that “when companies grasp the power they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were greeted by widespread derision.

That warning is now a reality. This year, oil and gas and mining firms have initiated a record number of cases against nations both wealthy and developing, contesting – similar to the Cumbrian coalmine – state efforts to stop global warming. Corporations have to date won $114bn through ISDS, of which energy giants have secured the majority. That is equivalent to the combined GDP