Last week I learned that the UK government is currently fighting two investor lawsuits: one from a sanctioned Russian oligarch challenging our economic security policies and another from a fossil fuel investor looking to obstruct UK climate action.
The UK may well win both cases, but it’s an outrage and an affront to democracy that the claims exist at all. They are not being heard in UK courts, but rather via a little-known mechanism called Investor-State Dispute Settlement (ISDS), which lets foreign investors sue governments for damages when public-interest policies threaten their profits.
This is no small technicality. ISDS functions as a parallel legal system that hands corporations extraordinary power over democratic decision making.
The government confirmed to me via a parliamentary question that Russian billionaire oligarch Mikhail Fridman has launched ISDS proceedings against the UK, almost certainly through the investor-state dispute settlement (ISDS) mechanism embedded in a 1989 UK–Russia investment treaty.
Fridman, sanctioned after Russia’s full-scale invasion of Ukraine, already failed to overturn those sanctions in the British courts. ISDS gives him a second route to challenge them through opaque international tribunals that operate outside domestic law.
This is not the first case that the Government has seen brought against it via ISDS this year. In August, investors in the West Cumbria coal mine filed the first climate-related ISDS case against the UK after the High Court struck down the mine’s planning permission over environmental concerns. Even when such cases fail, defending them will cost UK taxpayers millions. When they succeed, claimants can walk away with billions.
Such cases are not uncommon under ISDS provisions: it serves as a parallel legal regime that allows corporations to challenge democratic decisions whenever climate action, labour protections or sanctions threaten profits.
ISDS is contained in a wide-reaching international web of treaties – there are over 2800 of them in force internationally, of which the UK is party to 79. Historically, the fossil fuel industry has been the most litigious sector, using the ISDS system to be awarded over $80 billion in public money.
Even when governments win ISDS cases, the process costs the tax payers millions and takes years to reach a resolution. More importantly, the threat alone can put a stop to new policies; ministers weighing a measure in the public interest know they could face a multi-billion-pound lawsuit simply for doing the responsible thing. Denmark and New Zealand are among the governments that have publicly acknowledged how this “regulatory chill” stifles climate and social protections.
For all these reasons, the UN Special Rapporteur on Human Rights and the Environment has warned that ISDS has become “a major obstacle to urgent actions needed to address the planetary environmental and human rights crises.” Nobel Laureate Joseph Stiglitz has described ISDS as “a form of legal terrorism, that rich companies use to discourage countries from addressing the needs of their citizens and protecting the global environment”.
The Conservative Government understood this risk when it decided to withdraw from the most litigated ISDS treaty in the world, the Energy Charter Treaty, in 2024. It concluded that remaining a signatory “would not support our transition to cleaner, cheaper energy, and could even penalise us for our world-leading efforts to deliver net zero.”
Little official detail has been released about Fridman’s claim, but he has form. Across Europe, he has launched similar cases challenging sanctions through ISDS including a $16 billion claim against Luxembourg. Investors have already filed at least seven ISDS cases or pre-arbitration notices in response to EU sanctions against those with links to the Kremlin since the 2022 full-scale invasion of Ukraine.
The pattern is increasingly clear; ISDS is being used to undermine democratic decisions.
The two cases we now know the UK is defending expose the ISDS system entirely. This cannot continue, and the UK must now follow international partners such as Australia and New Zealand and make a break from ISDS to protect our domestic right to regulate. We should exclude ISDS from all future trade and investment agreements and review and terminate or renegotiate outdated investment treaties that still include ISDS to ensure the Government isn’t denied its sovereign right to regulate in this way again. No government should be prevented from acting in the public interest by the threat of multi-billion pound claims from oligarchs or fossil fuel investors. It is time to restore democratic control.
The UK is being sued by Russian oligarchs and coal mine investors – this cannot continue
