For the first time, an ICSID arbitration claim is being brought against the UK state. Woodhouse Investment Pte Ltd (the Singaporean major investor in West Cumbrian Mining (WCM)) is pursuing an investment arbitration relying on the 1975 UK-Singapore Bilateral Investment Treaty following the quashing of a proposal for a new coalmine in Cumbria by the High Court.
WCM was granted permission by the previous Conservative government to develop the new coalmine. However, in September 2024 the High Court blocked the proposed new mine over environmental concerns, applying the Supreme Court’s decision in Finch v Surrey County Council, which required scope 3 emissions (including emissions from burning coal) to be assessed in the environmental impact assessment. Subsequently, Labour ministers withdrew government support for the mine and WCM ceased its planning permission application. The claim highlights the challenges faced by governments and investors when shifts in climate policies result in the withdrawal of support for previously agreed projects.
Bilateral Investment Treaty Protections
Bilateral Investment Treaties (BITs) were designed to protect foreign investors from certain state conduct that may harm their investments by allowing them to step into the shoes of their home state and sue the host state directly. Clauses included in most BITs guarantee foreign investors the right to claim compensation if certain legal protections, such as, the right to fair and equitable treatment are infringed. The WCM claim is being brought under the ICSID Convention.
Implications for investors
The WCM challenge characterises a wider global trend in investment arbitrations in the energy sector. The states subject to such challenges have historically been mostly less economically developed countries, but in the last decade have increasingly also included nations with advanced economies.
In the UK, in recent years there have been an increasing number of claims challenging new fossil fuel or other non-climate-aligned projects in domestic courts. In tandem with this, following the Finch ruling, courts are now required to scrutinise environmental assessments more rigorously. This could result in an increasing number of approvals for projects being overturned by courts, and consequently financial losses for the investors in those projects. Projects with significant scope 3 emissions, such as coal mines, oil & gas exploration, and airport expansion projects are particularly vulnerable to challenges post-Finch. The outcome of the WCM case will reveal how the UK's international treaty commitments will be interpreted against its changing climate policy. Investors in UK-based projects who are facing challenges to their projects or suspect they will in the future, should be alert to developments in this case. Investors considering making a foreign investment should carefully consider how climate policy in the host jurisdiction may shift during the lifetime of the investment.
Initiating an investment arbitration is not however without risk for investors - specifically, a claim which challenges a climate policy intended to further the transition to renewable energy may well incur negative publicity and public backlash.
Regulatory chill
Depending on the home jurisdiction of the investors and the relevant BITs, a rise in project approvals being overturned could lead to new investment arbitrations against the UK, exposing the UK to a significant number of expensive legal actions. The impact, if this risk does materialise could be a 'regulatory chill' whereby the government is deterred from changing climate policy such as, rescinding approvals for fossil-fuel projects, to avoid potential investor-state claims. Climate campaigners argue that a 'regulatory chill', risks inhibiting the legitimate work of the government in combating climate change.
Public backlash
Over the last 15-20 years there has been a backlash against investment arbitration. These arbitrations are often less transparent compared to litigation through the court system, though more transparent than traditional commercial arbitrations. As with domestic litigation, the final award can result in states being required to pay public funds to private companies, and in investment arbitration these tend to be large sums thus attracting additional scrutiny. The backlash against investment arbitration coincided with a change in the type of states appearing as respondents in these arbitrations; while the respondents were almost exclusively developing nations that has been balancing over the last 15-20 years with 45% of investment arbitrations now being brought against developed states. The fact that the UK is now facing its first ICSID claim may increase calls for the UK to remove access to investment arbitration from its treaties, particularly if it is perceived as an indication of the direction of claims to come. Climate campaigners have recently expressed their frustration that the UK government will need to use public funds to defend a costly dispute brought by a fossil fuel company in response to action taken by the UK to mitigate or reduce climate change.
Influence of international courts on State's obligations
The opinion issued by the Inter-American Court of Human Rights (IACHR) on 29 May 2025 and the landmark advisory opinion of the International Court of Justice (ICJ) on the obligations of states with respect to climate change on 23 July 2025, highlighted the risks surrounding investor-state disputes.
The IACHR's opinion discussed the risk that states may be deterred from implementing public policies compatible with their environmental and climate obligations if they face potential ISDS claims, noting: "States should review their existing trade and investment agreements, and also settlement mechanisms for litigation between investors and States to ensure they do not limit or restrict efforts relating to climate change and human rights".
Similarly, the ICJ's opinion implied that states may be required to rescind fossil fuel licences, if it is necessary to meet their obligations in respect of climate change. The ICJ emphasised that states can be responsible for failing to take necessary measures to limit emissions caused by private actors under its jurisdiction - this would include foreign investors. The Supplemental Declaration of Judge Cleveland noted that states will need to re-evaluate their interpretation of investment agreements in light of their climate change obligations.
These opinions could increase pressure on the UK government to decline approval for non-climate-aligned projects in the future to avoid the risk of ISDS (or other) claims being brought as the UK's policy shifts in favour of achieving net-zero goals.
What next?
The WCM claim marks a pivotal moment in the intersection of climate policy and international investment law for the UK and raises critical questions about the future availability of investment arbitration in the UK’s international agreements. As the UK continues to transition away from fossil fuels, the tension between the UK's sovereign regulatory powers and investor protections is apparent. The outcome of this dispute may have far-reaching consequences for both investors and policymakers.
