Hello, International Oligarchs and Corporations! Kindly Proceed and Sue the UK for Vast Sums.

Can you understand our political system works? It could be along the lines of this. Citizens choose MPs. They debate and pass bills. When a majority is secured, the bills become law. Legislation is maintained by the courts. End of story. However, that was how it used to work. No longer.

The Emergence of Offshore Arbitration Panels

Today, foreign corporations, and the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at private courts staffed by corporate lawyers. The cases are held behind closed doors. In contrast to domestic courts, these tribunals allow no opportunity to appeal or judicial review. You or I cannot take a case to them, just as our government, or even companies headquartered in this country. They are open solely for entities registered abroad.

If a tribunal finds that a government measure may compromise the corporation’s anticipated profits, it has the power to grant financial penalties of hundreds of millions of pounds, even billions.

These sums represent not actual losses but funds the arbitrators decide the company could potentially have made. The government could be forced to abandon its policy. It will be discouraged from passing future laws of a similar nature, for fear of facing litigation.

A System Spiralling Out of Control

Historically high figures of cases are being brought, as firms take cues from each other, and private equity finance suits in exchange for a share of the settlements. The result? National sovereignty and democracy are now prohibitively expensive.

The process is called “investor-state dispute settlement” (ISDS). The explanation it can trump domestic law and the rulings taken by parliaments is that this clause has been inserted – without democratic mandate, and typically amid conditions of total confidentiality – into trade treaties.

A Concrete Instance: The Whitehaven Coal Mine

Last year, a conservation group achieved a major legal triumph at the High Court. The justice determined that plans to excavate the first new deep coal mine in the UK for three decades, at Whitehaven in Cumbria, were found to be illegally sanctioned by the previous government, which had endorsed the extraordinary assertion that the mine would have no consequence on climate commitments. The Labour government subsequently revoked the permission the previous administration had issued. Now, this victory could be compromised by an secret arbitration panel answering to exclusively the corporations filing the suit.

During August, a company whose ultimate owners are located in the Cayman Islands initiated proceedings against the UK government. Last week a tribunal in the US capital was set up to hear it.

The company is suing the UK for the money it might have made if the mine had been allowed to go ahead. We have little idea how much this might be. Who is acting on its behalf challenging the UK administration? A member of parliament, and ex-law officer in the Conservative government, that great patriot Geoffrey Cox. The state makes a decision, the domestic court upholds it, then a overseas corporation disputes it through an undemocratic arbitration panel, and a sitting MP acts on its behalf.

The Russian Case

Concurrently that the panel on the coalmine case was convened, information emerged from a government response that the UK is subject to further litigation under ISDS by a Russian oligarch, Mikhail Fridman. We know little of the case so far, but it is highly possible that he may employ the ISDS mechanism to challenge the restrictions the UK levied against him following the Russian aggression. He has filed a claim against Luxembourg on these grounds, demanding a colossal sum: half that government’s yearly budget. Included in the lawyers acting for him in that case? the wife of a former prime minister, spouse of the ex-UK leader.

International law scholars believe that the EU’s procrastination in utilising seized state funds as security for its financial support package arises from Belgium’s fear that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, secretive influence over democratic administrations may be obstructing the finance Ukraine critically depends on.

Misleading Claims and Growing Risks

We were assured that these events could not occur. In 2014, a government leader, promoting the largest and riskiest of all such treaties, stated: “We’ve signed trade agreement upon trade deal and there has never been a issue in the past.” An adviser on this topic described campaigners of “exaggeration … in reality, ISDS barely touches the UK much”. The general impression appeared to be that solely developing countries had to worry about these lawsuits. Warnings that “once firms start to realise the influence they now possess, they will redirect their efforts from the weak nations to the strong ones” were greeted by widespread derision.

That warning is now a reality. In the current period, fossil fuel and resource corporations have filed a historic level of suits against nations rich and poor, contesting – as in the case of the Cumbrian coalmine – official measures to stop climate breakdown. Companies have thus far won $114bn by using ISDS, of which energy giants have been awarded $84bn. That equates to the combined GDP