Greetings, Foreign Oligarchs and Firms! Kindly Come and Sue the UK for Billions of Pounds.

How do you understand our political system operates? It could be similar to this. The public votes for MPs. They debate and pass bills. Should a majority is achieved, the bills become law. The law is upheld by the courts. Simple as that. However, that’s how it used to work. Those days are over.

The Rise of Shadow Courts

Today, foreign corporations, and the oligarchs that control them, have the power to sue nation states for the regulations they pass, at offshore tribunals composed of commercial attorneys. Such disputes take place away from public scrutiny. Differing from national judiciaries, these bodies grant no opportunity to appeal or judicial review. You or I cannot take a case to them, nor can our government, or even companies based in this country. The door is open solely for entities operating from foreign soil.

If a tribunal finds that a law or policy could harm the corporation’s expected profits, it can award compensation of hundreds of millions, running into billions.

These awards are based not on actual losses but money the panel members decide the company would perhaps have made. The state may have to abandon its policy. It is discouraged from enacting future policies in that area, worried about incurring a lawsuit.

A System Spiralling Out of Control

Historically high figures of legal actions are being filed, as corporations take cues from each other, and hedge funds fund legal actions in exchange for a share of the awards. The result? Sovereignty and democracy are turning into too costly.

This mechanism is known as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings taken by parliaments is that this clause has been written – without public consent, and typically amid a climate of extreme secrecy – within trade treaties.

A Specific Example: The Whitehaven Coalmine

A year ago, activists achieved a major legal triumph at the High Court. The justice found that schemes to dig the first new deep coal mine in the UK for a generation, in Cumbria, were unlawfully approved by the outgoing administration, which had endorsed the extraordinary assertion that the mine could have no impact on national carbon targets. The new government subsequently revoked the consent the previous administration had granted. Now, this victory faces being overturned by an offshore tribunal reporting to exclusively the entities bringing the case.

In August, a corporate entity whose final controllers are based in the Cayman Islands lodged a claim against the UK government. Recently a tribunal in the US capital was established to consider the case.

This firm is litigating against the UK for the revenue it would have generated if the mine had been permitted to commence operations. We have little idea how much this might be. Which individual is representing it against the UK administration? A member of parliament, and former attorney-general in the previous government, the self-proclaimed patriot Sir Geoffrey Cox. The state passes a law, the high court upholds it, then a international entity challenges it through an secretive arbitration panel, and a member of our parliament works for its behalf.

An Oligarch's Case

Simultaneously that the panel on the mining lawsuit was convened, we learned from a parliamentary answer that the UK faces another lawsuit under ISDS by a Russian oligarch, a sanctioned individual. The public knows nothing of the case so far, but it appears probable that he’ll use the arbitration process to fight the restrictions the UK imposed on him following the invasion of Ukraine. He has previously started suing Luxembourg on these grounds, claiming sixteen billion dollars: half that nation's annual revenue. Included in the counsel on his side? Cherie Blair, wife of the former British prime minister.

International law scholars contend that the EU’s hesitation in leveraging immobilised state funds as collateral for its loan to Ukraine arises from Belgium’s fear that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine critically depends on.

False Assurances and Escalating Costs

Politicians promised that these events could not occur. Years ago, a senior politician, advocating for the most significant and hazardous of all such treaties, declared: “We’ve signed investment treaty after trade deal and there has not been a case in the past.” A consultant on this matter accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The general impression was crafted to be that only poorer nations had to worry about ISDS claims. Predictions that “as corporations grasp the authority they’ve been granted, they will redirect their efforts from the vulnerable countries to the wealthy nations” were greeted by scepticism.

That threat has come to pass. Recently, energy and mining firms have lodged a unprecedented number of claims against nations across the economic spectrum, contesting – similar to the UK mine – government attempts to halt environmental catastrophe. Companies have so far won $114bn via ISDS, of which oil majors have secured the majority. That represents the combined GDP