Welcome, Foreign Oligarchs and Corporations! Please Come and Sue the UK for Billions of Pounds.

How do you understand our democratic process operates? Maybe similar to this. We elect MPs. They debate and pass bills. Should a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Yet, that used to be how it used to work. No longer.

The Rise of Shadow Courts

Today, international firms, or the oligarchs that control them, are able to litigate against governments for the laws they pass, at private courts staffed by corporate lawyers. These proceedings are conducted in secret. Unlike our courts, these bodies grant no opportunity to appeal or legal review. The general public cannot take a case to them, nor can our government, or even businesses based in this country. They are open exclusively to entities based overseas.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it can award financial penalties of vast sums, running into billions.

These sums constitute not tangible damages but funds the tribunal officials determine the company would perhaps have made. The state might be compelled to rescind the measure. It is discouraged from introducing similar legislation in that area, for fear of being sued.

A Mechanism Running Rampant

Record numbers of disputes are being brought, as companies take cues from each other, and investment funds finance suits for a share of a portion of the awards. The result? Sovereignty and democracy are turning into unaffordable.

The process is referred to as “investor-state dispute settlement” (ISDS). The reason it is permitted to trump national legislation and the decisions taken by legislatures is that this clause has been written – without democratic mandate, and often in an atmosphere of total confidentiality – inside international trade agreements.

A Concrete Example: The UK Coalmine

Last year, a conservation group secured a significant win at the High Court. The judge determined that schemes to open the first major coal mine in the UK for a generation, in Cumbria, were found to be unlawfully approved by the Conservative government, which had accepted the extraordinary assertion that the mine would have no impact on our carbon budgets. The Labour government later cancelled the licence the Tories had issued. Now, this success could be compromised by an secret arbitration panel answering to only the entities petitioning it.

During August, a firm whose ultimate owners reside in the Cayman Islands initiated proceedings challenging the UK government. The previous week a arbitration panel in Washington DC was convened to adjudicate on it.

The claimant is seeking compensation from the UK for the revenue it would have generated if the mine had been allowed to commence operations. The public has no idea how much this sum represents. Who is acting on its behalf challenging the state? A sitting MP, and former attorney-general in the previous government, the noted patriot Sir Geoffrey Cox. The state enacts a policy, the national judiciary validates it, then a overseas corporation contests it through an unaccountable private court, and a sitting MP acts on its behalf.

A Sanctions Lawsuit

Simultaneously that the panel on the coalmine case was appointed, information emerged from a government response that the UK faces another lawsuit under ISDS by a wealthy Russian individual, an oligarch. The public knows nothing of the case so far, but it seems likely that he’ll use the ISDS mechanism to fight the penalties the UK imposed on him subsequent to the Russian aggression. He has started suing Luxembourg for this reason, claiming $16bn: an amount representing half state's yearly income. Part of the legal team on his side? Cherie Blair, spouse of the previous PM.

International law scholars believe that the EU’s delay in using frozen state funds 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 bilateral investment treaty. This extraordinary, undemocratic power over sovereign states may be obstructing the money Ukraine desperately needs.

False Assurances and Escalating Threats

Politicians promised that these scenarios were not possible. In 2014, a senior politician, championing the most significant and hazardous of all these agreements, stated: “We’ve signed investment treaty upon trade deal and we have never seen a case in the past.” An expert on this matter labelled campaigners of “alarmism … the fact is, ISDS barely touches the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Cautionary notes that “once firms start to realise the influence they now possess, they will shift their focus from the poorer states to the strong ones” were met with widespread derision.

That prediction has now materialised. In the current period, oil and gas and extraction companies have initiated a historic level of suits against nations across the economic spectrum, contesting – like the example of the Cumbrian coalmine – government attempts to prevent environmental catastrophe. Companies have thus far won vast sums through ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP