Welcome, International Oligarchs and Firms! Kindly Come and Take Legal Action Against the UK for Vast Sums.

What is your perceive our political system works? It could be similar to this. Citizens choose MPs. They vote on bills. When a majority is obtained, the bills become law. Legislation is maintained by the courts. Simple as that. Well, that used to be how it once functioned. No longer.

The Emergence of Offshore Tribunals

Nowadays, foreign corporations, or the oligarchs who own them, have the power to sue nation states for the laws they pass, at offshore tribunals staffed by commercial attorneys. These proceedings take place behind closed doors. Differing from national judiciaries, these tribunals provide no right of appeal or legal review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises based in this country. They are open exclusively to corporations registered abroad.

When a secret court finds that a legislative action could harm the corporation’s anticipated profits, it can award financial penalties of hundreds of millions, running into billions.

This compensation are based not on tangible damages but money the arbitrators determine the company might otherwise have made. The government could be forced to drop the legislation. It is hesitant to passing future laws along the same lines, worried about incurring a lawsuit.

A Mechanism Growing Exponentially

Historically high figures of cases are being brought, as companies observe each other, and hedge funds fund legal actions in exchange for a share of the awards. The result? National sovereignty and democracy are now too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the decisions made by elected bodies is that this clause has been inserted – absent public approval, and often in an atmosphere of extreme secrecy – inside bilateral investment treaties.

A Real-World Example: The Whitehaven Coalmine

Last year, activists won a great victory at the High Court. The justice found that proposals to excavate the first deep coalmine in the UK for a generation, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had agreed to the extraordinary assertion that the mine could have no impact on national carbon targets. The new government subsequently revoked the licence the Tories had issued. Now, this success is under threat by an offshore tribunal answering to only the entities petitioning it.

During August, a firm whose final controllers are based in the tax haven initiated proceedings against the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is suing the UK for the revenue it could have earned if the mine had received permission to commence operations. The public has little idea how much this sum represents. What legal team is acting on its behalf against the British government? An elected representative, and ex-law officer in the outgoing administration, the noted patriot Geoffrey Cox. The state makes a decision, the high court validates it, then a foreign company disputes it through an unaccountable private court, and a elected official represents its behalf.

An Oligarch's Challenge

Concurrently that the court on the coalmine case was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. We know nothing of the case at present, but it is highly possible that he will utilise the ISDS mechanism to challenge the sanctions the UK levied against him after the war in Ukraine. He has already initiated proceedings against a small nation for this reason, claiming $16bn: equivalent to half of nation's yearly budget. Among the counsel on his side? the wife of a former prime minister, spouse of the former British prime minister.

International law scholars contend that the EU’s procrastination in utilising seized state funds as security for its aid for Ukraine arises from concerns within Belgium that it could be subject to litigation in the secret arbitration panels, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine critically depends on.

Misleading Claims and Mounting Threats

Politicians promised that these events wouldn’t happen. Years ago, a senior politician, promoting the largest and riskiest of all investment pacts, declared: “Britain has agreed to trade deal after trade deal and there has not been a problem in the past.” An adviser on this matter labelled activists of “alarmism … in reality, ISDS barely touches the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “when companies begin to understand the influence they now possess, they will turn their attention from the poorer states to the strong ones” were met with widespread derision.

That warning has come to pass. This year, oil and gas and mining firms have lodged a historic level of claims against nations both wealthy and developing, opposing – like the example of the UK mine – government attempts to stop global warming. Corporations have to date won one hundred and fourteen billion dollars via ISDS, of which energy giants have been awarded the majority. That equates to the combined GDP