Greetings, International Tycoons and Companies! Please Come and Litigate Against the UK for Billions of Pounds.

Can you understand our political system works? Maybe similar to this. Citizens choose MPs. They legislate on bills. When a majority is achieved, the bills become law. The law is maintained by the courts. End of story. Yet, that was how it once functioned. No longer.

The Advent of Shadow Courts

Nowadays, overseas companies, along with the wealthy individuals who own them, have the power to sue elected administrations for the regulations they pass, at private courts composed of corporate lawyers. These proceedings are conducted in secret. Differing from national judiciaries, these panels grant no opportunity to appeal or judicial review. Ordinary citizens cannot take a case to them, nor can our government, or even enterprises operating from this country. They are open only to corporations based overseas.

When a secret court rules that a legislative action might diminish the corporation’s anticipated profits, it has the power to grant compensation of vast sums, potentially billions.

These sums represent not actual losses but compensation the tribunal officials determine the company might otherwise have made. The administration may have to drop the legislation. It becomes deterred from enacting future policies along the same lines, worried about incurring a lawsuit.

A Process Spiralling Out of Control

Historically high figures of cases are being filed, as firms observe each other, and investment funds fund legal actions in exchange for a cut of the settlements. The outcome? Sovereignty and democracy are becoming unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The explanation it is allowed to trump a country's own laws and the rulings taken by elected bodies is that this stipulation has been written – absent public approval, and typically amid a climate of profound opacity – into trade treaties.

A Specific Example: The UK Coal Mine

Twelve months ago, activists secured a significant win at the senior court. The judge ruled that proposals to open the first deep coalmine in the UK for 30 years, in northwest England, were found to be unlawfully approved by the previous government, which had endorsed the bizarre claim that the mine would have had zero effect on national carbon targets. The new government then withdrew the licence the previous administration had granted. Now, this victory faces being overturned by an foreign court accountable to only the corporations petitioning it.

In August, a firm whose beneficial owners are based in the offshore financial centre initiated proceedings against the UK government. The previous week a dispute settlement body in the United States was convened to hear it.

The company is seeking compensation from the UK for the revenue it would have generated if the mine had received permission to proceed. We have no idea how much this could amount to. Which individual is serving as its counsel against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government passes a law, the domestic court supports it, then a foreign company contests it through an undemocratic private court, and a sitting MP represents its behalf.

The Russian Case

On the same day that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK faces another lawsuit under ISDS by a wealthy Russian individual, Mikhail Fridman. Details are scarce of the case so far, but it seems likely that he’ll use the tribunal to fight the restrictions the UK enacted against him following the invasion of Ukraine. He has already filed a claim against a small nation for this reason, claiming sixteen billion dollars: equivalent to half of nation's annual revenue. Part of the lawyers acting for him in that case? the wife of a former prime minister, wife of the previous PM.

International law scholars believe that the EU’s procrastination in leveraging immobilised Russian assets as guarantee for its loan to Ukraine arises from Belgium’s fear that it could be sued in the secret arbitration panels, under a trade agreement. This extraordinary, unaccountable authority over elected governments may be obstructing the finance Ukraine urgently requires.

False Assurances and Growing Costs

Politicians promised that such things could not occur. Previously, a senior politician, advocating for the most significant and hazardous of all investment pacts, told us: “Britain has agreed to investment treaty after trade deal and there has never been a problem in the past.” An expert on this matter accused campaigners of “exaggeration … the truth is, ISDS has little impact on the UK much”. The overall message seemed to be that solely developing countries needed to fear ISDS claims. Predictions that “when companies begin to understand the influence they now possess, they will turn their attention from the vulnerable countries to the developed economies” were met with widespread derision.

That warning has come to pass. This year, fossil fuel and mining firms have initiated a historic level of claims against nations rich and poor, opposing – as in the case of the Cumbrian coalmine – state efforts to halt environmental catastrophe. Companies have to date won one hundred and fourteen billion dollars via ISDS, of which fossil fuel companies have been awarded $84bn. That equates to the combined GDP