Hello, International Magnates and Corporations! Please Proceed and Take Legal Action Against the UK for Vast Sums.

What is your understand our system of government operates? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is obtained, the bills become law. Legislation are enforced by the courts. Simple as that. However, that was how it used to work. Not anymore.

The Advent of Shadow Courts

In the modern era, international firms, or the wealthy individuals who own them, have the power to sue governments for the policies they pass, at secret arbitration panels made up of business advocates. Such disputes are held away from public scrutiny. Differing from national judiciaries, these panels allow no opportunity to appeal or oversight by judges. You or I are unable to file a case to them, and neither can our government, or even companies based in this country. They are open exclusively to entities registered abroad.

When a secret court rules that a law or policy may compromise the corporation’s projected profits, it can award financial penalties of vast sums, even billions.

These sums constitute not real financial harm but money the panel members conclude the company would perhaps have made. The administration may have to abandon its policy. It is deterred from passing future laws in that area, for fear of incurring a lawsuit.

A Process Growing Exponentially

Historically high figures of cases are being filed, as corporations learn from each other, and investment funds finance suits for a share of a share of the awards. The result? Sovereignty and popular rule are becoming prohibitively expensive.

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

A Concrete Instance: The Cumbrian Coalmine

Last year, a conservation group won a great victory at the high court. The justice ruled that plans to open the first major coal mine in the UK for a generation, in Cumbria, had been illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have had no consequence on our carbon budgets. The Labour government subsequently revoked the licence the Tories had issued. Currently, this success is under threat by an foreign court accountable to no one but the companies bringing the case.

During August, a firm whose final controllers are based in the offshore financial centre lodged a claim challenging the UK government. Recently a dispute settlement body in the United States was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it might have made if the mine had been allowed to proceed. Citizens have no idea how much this might be. What legal team is representing it challenging the state? A sitting MP, and previous senior legal advisor in the Conservative government, that great patriot Sir Geoffrey Cox. The state makes a decision, the national judiciary supports it, then a international entity challenges it through an secretive private court, and a member of our parliament acts on its behalf.

An Oligarch's Case

On the same day that the panel on the coalmine case was established, it was revealed from a ministerial statement that the UK is subject to further litigation under ISDS by a wealthy Russian individual, a sanctioned individual. Details are nothing of the case at present, but it is highly possible that he may employ the ISDS mechanism to challenge the penalties the UK levied against him after the Russian aggression. He has already initiated proceedings against Luxembourg on these grounds, demanding sixteen billion dollars: equivalent to half of state's yearly income. Among the legal team acting for him in that case? a prominent lawyer, married to the previous PM.

International law scholars contend that the EU’s delay in using frozen Russian assets as guarantee for its financial support package is due to concerns within Belgium that it could be taken to court in the offshore corporate courts, under a investment pact. This remarkable, secretive influence over elected governments may be obstructing the finance Ukraine desperately needs.

Misleading Claims and Escalating Risks

Politicians promised that these events wouldn’t happen. Years ago, a government leader, promoting the biggest and most dangerous of all these agreements, told us: “The UK has signed investment treaty after trade deal and there has never been a problem in the past.” A consultant on this topic accused campaigners of “alarmism … the truth is, ISDS barely touches the UK much”. The overall message appeared to be that only poorer nations needed to fear these lawsuits. Cautionary notes that “as corporations begin to understand the influence they now possess, they will redirect their efforts from the poorer states to the developed economies” were dismissed with widespread derision.

That warning has come to pass. Recently, oil and gas and resource corporations have initiated a record number of suits against nations across the economic spectrum, challenging – similar to the Whitehaven project – government attempts to halt climate breakdown. Companies have thus far won one hundred and fourteen billion dollars by using ISDS, of which fossil fuel companies have been awarded the majority. That is equivalent to the combined GDP