Greetings, Overseas Oligarchs and Firms! Kindly Proceed and Litigate Against the UK for Vast Sums.

Can you reckon our political system works? Maybe similar to this. The public votes for MPs. They vote on bills. When a majority is obtained, the bills are enacted as law. Legislation is maintained by the courts. Simple as that. Yet, that used to be how it once functioned. No longer.

The Emergence of Secret Courts

Nowadays, overseas companies, and the wealthy individuals that control them, are able to litigate against governments for the laws they pass, at secret arbitration panels staffed by business advocates. The cases are conducted in secret. In contrast to domestic courts, these bodies grant no avenue for appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even businesses based in this country. The door is open solely for corporations registered abroad.

If a tribunal rules that a government measure might diminish the corporation’s expected profits, it can award financial penalties of vast sums, potentially billions.

These sums constitute not real financial harm but money the panel members determine the company could potentially have made. The administration may have to rescind the measure. It becomes deterred from passing future laws in that area, due to the risk of incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being brought, as companies observe each other, and private equity bankroll lawsuits in return for a cut of the takings. The consequence? National sovereignty and democracy are turning into too costly.

The system is known as “investor-state dispute settlement” (ISDS). The rationale it can trump a country's own laws and the rulings taken by legislatures is that this provision has been inserted – absent public approval, and typically amid an atmosphere of profound opacity – within international trade agreements.

A Concrete Instance: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice ruled that proposals to excavate the first major coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the previous government, which had agreed to the bizarre claim that the mine would have zero effect on our carbon budgets. The Labour government then withdrew the consent the former government had issued. Now, this success could be compromised by an secret arbitration panel answering to exclusively the corporations petitioning it.

Last August, a company whose final controllers reside in the tax haven filed a lawsuit versus the UK government. Last week a tribunal in the US capital was set up to consider the case.

The company is suing the UK for the money it would have generated if the mine had been allowed to commence operations. Citizens have no idea how much this sum represents. What legal team is serving as its counsel challenging the British government? A sitting MP, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The state makes a decision, the national judiciary upholds it, then a foreign company challenges it through an secretive arbitration panel, and a elected official represents its behalf.

An Oligarch's Challenge

On the same day that the tribunal on the coalmine case was convened, information emerged from a government response that the UK faces another lawsuit under ISDS by a Russian oligarch, Mikhail Fridman. The public knows nothing of the case at present, but it appears probable that he’ll use the arbitration process to contest the penalties the UK levied against him after the Russian aggression. He has previously initiated proceedings against a small nation on these grounds, demanding $16bn: an amount representing half nation's yearly budget. Part of the counsel acting for him in that case? a prominent lawyer, married to the former British prime minister.

Legal experts contend that the EU’s delay in utilising seized Russian assets as collateral for its financial support package stems from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, undemocratic power over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Risks

Politicians promised that such things wouldn’t happen. Years ago, a government leader, advocating for the most significant and hazardous of all investment pacts, told us: “We’ve signed trade agreement upon trade deal and there has not been a problem in the past.” An adviser on this matter labelled campaigners of “exaggeration … the fact is, ISDS barely touches the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Warnings that “once firms grasp the power bestowed upon them, they will turn their attention from the vulnerable countries to the wealthy nations” were dismissed with widespread derision.

That threat is now a reality. This year, energy and resource corporations have initiated a unprecedented number of cases against nations both wealthy and developing, challenging – as in the case of the Whitehaven project – government attempts to stop global warming. Firms have thus far won $114bn through ISDS, of which energy giants have obtained $84bn. That is equivalent to the combined GDP