Hello, Overseas Oligarchs and Corporations! Kindly Proceed and Litigate Against the UK for Billions.

How do you understand our political system functions? Maybe similar to this. The public votes for MPs. They legislate on bills. When a majority is secured, the bills pass into law. Legislation are enforced by the courts. Simple as that. Well, that was how it used to work. Not anymore.

The Advent of Offshore Tribunals

Nowadays, overseas companies, and the oligarchs behind them, have the power to sue elected administrations for the regulations they pass, at secret arbitration panels composed of corporate lawyers. Such disputes are conducted behind closed doors. Unlike our courts, these bodies allow no avenue for appeal or judicial review. You or I are unable to file a case to them, just as our government, including businesses based in this country. Access is granted only to entities based overseas.

Should an arbitration panel finds that a legislative action might diminish the corporation’s expected profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

This compensation represent not real financial harm but money the arbitrators decide the company could potentially have made. The state might be compelled to rescind the measure. It will be discouraged from passing future laws of a similar nature, worried about incurring a lawsuit.

A Process Growing Exponentially

Record numbers of legal actions are being initiated, as companies observe each other, and investment funds bankroll lawsuits in exchange for a cut of the takings. The outcome? Democratic sovereignty and democratic governance are now prohibitively expensive.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is permitted to trump domestic law and the choices taken by parliaments is that this provision has been written – without democratic mandate, and frequently under a climate of profound opacity – inside bilateral investment treaties.

A Specific Instance: The Whitehaven Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The justice ruled that plans to excavate the first deep coalmine in the UK for three decades, in Cumbria, were found to be wrongly permitted by the outgoing administration, which had endorsed the bizarre claim that the mine would have zero effect on climate commitments. The incoming administration later cancelled the licence the Tories had issued. Now, this legal outcome faces being overturned by an foreign court answering to exclusively the entities bringing the case.

Last August, a corporate entity whose beneficial owners are located in the offshore financial centre initiated proceedings challenging the UK government. Recently a tribunal in the US capital was set up to hear it.

The company is seeking compensation from the UK for the profits it would have generated if the mine had been permitted to proceed. Citizens have no clear indication how much this might be. Which individual is representing it against the state? A sitting MP, and former attorney-general in the outgoing administration, the self-proclaimed patriot the MP. The government makes a decision, the high court upholds it, then a overseas corporation challenges it through an unaccountable private court, and a elected official works for its behalf.

An Oligarch's Challenge

Simultaneously that the panel on the coal mine dispute was appointed, it was revealed from a ministerial statement that the UK faces another lawsuit under ISDS by a Russian billionaire, an oligarch. Details are little of the case so far, but it appears probable that he will utilise the ISDS mechanism to contest the sanctions the UK levied against him after the invasion of Ukraine. He has previously started suing another European state on these grounds, seeking sixteen billion dollars: equivalent to half of government’s yearly income. Part of the lawyers acting for him in that case? the wife of a former prime minister, married to the former British prime minister.

Trade specialists contend that the EU’s procrastination in utilising seized oligarchs' funds as collateral for its aid for Ukraine stems from apprehension in Brussels that it could be taken to court in the ISDS tribunals, under a investment pact. This unprecedented, unaccountable authority over sovereign states could be blocking the funds Ukraine critically depends on.

Empty Promises and Escalating Costs

The public was told that such things were not possible. Years ago, a former prime minister, championing the largest and riskiest of all these agreements, told us: “Britain has agreed to investment treaty after trade deal and there has never been a issue in the past.” An adviser on this topic labelled activists of “alarmism … the truth is, ISDS barely touches the UK much”. The prevailing narrative seemed to be that exclusively weaker states had to worry about such legal actions. Warnings that “as corporations grasp the power they’ve been granted, they will turn their attention from the weak nations to the strong ones” were greeted by general mockery.

That prediction has come to pass. This year, fossil fuel and mining firms have lodged a record number of cases against nations rich and poor, opposing – as in the case of the UK mine – state efforts to prevent climate breakdown. Corporations have thus far won one hundred and fourteen billion dollars through ISDS, of which oil majors have been awarded the majority. That represents the combined GDP