Hello, International Magnates and Firms! Kindly Proceed and Take Legal Action Against the UK for Billions of Pounds.

Can you reckon our political system functions? Perhaps something like this. We elect MPs. They debate and pass bills. When a majority is secured, the bills pass into law. The law is maintained by the courts. End of story. Well, that was how it operated in the past. Those days are over.

The Emergence of Shadow Tribunals

In the modern era, overseas companies, along with the billionaires behind them, are able to litigate against elected administrations for the policies they pass, at private courts made up of corporate lawyers. The cases are conducted away from public scrutiny. In contrast to domestic courts, these tribunals provide no right of appeal or judicial review. The general public cannot take a case to them, nor can our government, including companies operating from this country. They are open only to entities operating from foreign soil.

When a secret court determines that a legislative action might diminish the corporation’s anticipated profits, it may order damages of hundreds of millions of pounds, running into billions.

These sums are based not on real financial harm but compensation the tribunal officials decide the company might otherwise have made. The administration might be compelled to drop the legislation. It will be deterred from enacting future policies of a similar nature, due to the risk of incurring a lawsuit.

A System Growing Exponentially

Unprecedented levels of cases are being brought, as firms learn from each other, and investment funds fund legal actions for a share of a cut of the takings. The outcome? Democratic sovereignty and democratic governance are turning into unaffordable.

This mechanism is referred to as “investor-state dispute settlement” (ISDS). The reason it is allowed to trump national legislation and the decisions enacted by parliaments is that this stipulation has been incorporated – without democratic mandate, and frequently under a climate of extreme secrecy – into bilateral investment treaties.

A Concrete Instance: The UK Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The presiding officer ruled that proposals to dig the first new deep coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the previous government, which had endorsed the questionable argument that the mine would have had no consequence on national carbon targets. The Labour government subsequently revoked the permission the former government had approved. Now, this victory is under threat by an secret arbitration panel answering to only the corporations filing the suit.

In August, a company whose final controllers reside in the offshore financial centre filed a lawsuit challenging the UK government. Recently a arbitration panel in the US capital was convened to adjudicate on it.

The claimant is litigating against the UK for the money it would have generated if the mine had received permission to proceed. The public has no clear indication how much this could amount to. Who is serving as its counsel in opposition to the British government? A sitting MP, and ex-law officer in the previous government, that great patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a foreign company contests it through an secretive arbitration panel, and a member of our parliament works for its behalf.

The Russian Case

On the same day that the panel on the mining lawsuit was convened, we learned from a ministerial statement that the UK is subject to further litigation under ISDS by a Russian oligarch, a sanctioned individual. Details are little of the case to date, but it is highly possible that he will utilise the tribunal to contest the restrictions the UK imposed on him after the invasion of Ukraine. He has filed a claim against another European state with similar intent, claiming $16bn: equivalent to half of nation's yearly income. Included in the counsel on his side? a prominent lawyer, wife of the previous PM.

Trade specialists contend that the EU’s delay in leveraging immobilised state funds as collateral for its loan to Ukraine arises from apprehension in Brussels that it could be taken to court in the secret arbitration panels, under a trade agreement. This unprecedented, secretive influence over sovereign states may be obstructing the finance Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that these events were not possible. In 2014, a senior politician, promoting the biggest and most dangerous of all such treaties, stated: “Britain has agreed to trade deal upon trade deal and we have never seen a case in the past.” An adviser on this matter labelled campaigners of “exaggeration … in reality, ISDS has little impact on the UK much”. The overall message was crafted to be that exclusively weaker states should be concerned by these lawsuits. Predictions that “as corporations start to realise the influence they’ve been granted, they will redirect their efforts from the poorer states to the strong ones” were greeted by general mockery.

That warning has come to pass. This year, oil and gas and resource corporations have lodged a record number of cases against nations rich and poor, opposing – as in the case of the Whitehaven project – state efforts to halt climate breakdown. Corporations have so far won one hundred and fourteen billion dollars via ISDS, of which energy giants have secured $84bn. That represents the combined GDP

James Shepherd
James Shepherd

A seasoned business strategist with over a decade of experience in digital marketing and corporate growth initiatives.