Welcome, Overseas Oligarchs and Companies! Kindly Come and Sue the UK for Billions.

What is your perceive our system of government functions? Maybe similar to this. Citizens choose MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. The law are enforced by the courts. Simple as that. Well, that was how it operated in the past. No longer.

The Emergence of Secret Tribunals

In the modern era, overseas companies, and the billionaires behind them, have the power to sue elected administrations for the regulations they pass, at private courts staffed by corporate lawyers. These proceedings are held away from public scrutiny. In contrast to domestic courts, these bodies provide no opportunity to appeal or oversight by judges. You or I cannot take a case to them, just as our government, or even enterprises headquartered in this country. The door is open exclusively to businesses operating from foreign soil.

When a secret court rules that a legislative action may compromise the corporation’s projected profits, it has the power to grant damages of vast sums, even billions.

These sums constitute not real financial harm but money the panel members conclude the company might otherwise have made. The government may have to drop the legislation. It becomes discouraged from passing future laws along the same lines, for fear of being sued.

A Mechanism Spiralling Out of Control

Record numbers of legal actions are being brought, as firms take cues from each other, and hedge funds fund legal actions for a share of a portion of the settlements. The outcome? Democratic sovereignty and democracy are turning into unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it is allowed to supersede domestic law and the choices taken by parliaments is that this clause has been inserted – without democratic mandate, and typically amid an atmosphere of total confidentiality – into international trade agreements.

A Specific Example: The UK Coal Mine

Last year, a conservation group secured a significant win at the high court. The presiding officer ruled that schemes to excavate the first deep coalmine in the UK for 30 years, in Cumbria, were wrongly permitted by the Conservative government, which had agreed to the extraordinary assertion that the mine would have no impact on our carbon budgets. The incoming administration later cancelled the consent the previous administration had issued. Today, this legal outcome could be compromised by an foreign court answering to only the entities filing the suit.

In August, a company whose final controllers are located in the Cayman Islands lodged a claim challenging the UK government. Last week a dispute settlement body in the United States was convened to adjudicate on it.

The company is suing the UK for the money it would have generated if the mine had been allowed to proceed. The public has no idea how much this might be. Who is acting on its behalf against the UK administration? An elected representative, and previous senior legal advisor in the Conservative government, the noted patriot Sir Geoffrey Cox. The administration enacts a policy, the national judiciary supports it, then a international entity contests it through an unaccountable offshore tribunal, and a elected official works for its behalf.

An Oligarch's Lawsuit

Concurrently that the panel on the coalmine case was established, we learned from a government response that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are nothing of the case to date, but it appears probable that he will utilise the ISDS mechanism to contest the penalties the UK enacted against him following the invasion of Ukraine. He has already filed a claim against another European state for this reason, demanding a colossal sum: half that government’s annual revenue. Part of the counsel on his side? Cherie Blair, spouse of the former British prime minister.

Trade specialists believe that the EU’s hesitation in utilising seized oligarchs' funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a bilateral investment treaty. This unprecedented, unaccountable authority over elected governments might be preventing the funds Ukraine urgently requires.

Empty Promises and Escalating Risks

We were assured that such things could not occur. Previously, a government leader, advocating for the largest and riskiest of all investment pacts, stated: “We’ve signed trade deal after trade deal and there has not been a case in the past.” A consultant on this matter accused critics of “alarmism … the truth is, ISDS does not affect the UK much”. The overall message was crafted to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations begin to understand the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the strong ones” were met with widespread derision.

That prediction is now a reality. This year, energy and mining firms have filed a historic level of claims against nations across the economic spectrum, challenging – similar to the Whitehaven project – state efforts to stop climate breakdown. Corporations have to date won vast sums via ISDS, of which oil majors have obtained $84bn. That represents the combined GDP