Arab wealth funds are above the law in Britain, court rules
- Mark Hollingsworth
- Mar 20
- 3 min read
Updated: Apr 9
Court ruling effectively grants diplomatic immunity to sovereign wealth fund executives
Powerful Middle Eastern sovereign wealth funds are effectively above the law and able to claim diplomatic immunity if accused of wrongdoing, a court has ruled.
An employment tribunal found that a former head of the London-based Kuwait Investment Authority (KIA) could not claim wrongful dismissal because the English courts have no jurisdiction over the trillion-dollar fund.
According to legal experts the ruling means sovereign wealth fund executives can also claim diplomatic immunity if they are charged in relation to financial crimes such as fraud or money laundering.
Judge Brown ruled the KIA is a separate entity from the Kuwaiti government as it invests state assets in the private sector. And yet he also concluded the KIA has immunity from being sued by Saleh al-Ateeqi, the former chief executive, because he was employed in the exercise of sovereign authority and so had diplomatic status.
He had claimed he was unfairly dismissed after raising serious concerns as a whistleblower over the running of the fund. However, Judge Brown dismissed the claim after concluding that “the KIA has immunity from the jurisdiction of the courts of the UK”.
The claim highlights the unique status enjoyed by Abdulmohsin Al Mukhaizeem, the current KIA chief executive, and essentially blocks any regulatory oversight of sovereign wealth funds in the UK.
Geoffrey Robertson KC, a critic of the abuses of diplomatic immunity, said the ruling placed some individuals above the law.
He said: “Diplomats are not allowed to engage in business, but we know Middle East embassies where they do little else.
“The UK Government has turned a blind eye to this because the Foreign Office favours certain governments for trading reasons and does not ask questions. The courts have said, ‘Well, the UK Government accepts these people as diplomats, and diplomats they are.’”
The KIA has an estimated $50bn (£39bn) of UK assets under management including shares in BP, Vodafone, HSBC and London City airport. The fund has also invested in luxury property in the UK and invested $2.7bn in More London, a development that includes the capital’s former City Hall, near Tower Bridge and dubbed the “glass gonad”.
Globally, the value of the world’s sovereign wealth funds is estimated at £10 trillion. Vehicles controlled by Gulf petrostates have become some of the world’s most influential investors in recent years, with Saudi Arabia, the United Arab Emirates and Qatar among the biggest players. All use London as a hub for their international investing.
Sovereign wealth funds are already exempt from paying corporation tax on their UK income, not obliged to file annual returns at Companies House and are not regulated by the Financial Conduct Authority.
The previous Conservative government reviewed their favourable status and tax exemption but Kemi Badenoch, – the current Tory leader, urged the Treasury to abandon plans to tighten the regime.
Like most sovereign wealth funds, the KIA retains well-connected powerful political advisors. In 2017, when Lord Hammond was chancellor, he visited Kuwait, Qatar and the UAE to promote trade deals with the UK. In Kuwait, he met the finance minister and the KIA.
As foreign secretary, Mr Hammond criticised a judge who was scathing about the diplomatic immunity claimed by a Saudi billionaire who said he was “a representative” of the tiny Caribbean Island of St Lucia.
In July 2020, a year after Lord Hammond left the Foreign Office, he was hired as a highly paid adviser by the KIA, which he declares in the Lords register of interests.
When asked about his consultancy, Lord Hammond said: “We are dependent on foreign direct investment. We need to be pragmatic”. He declined to comment for this story.
Sheikh Saoud Salem Al-Sabah, the KIA’s managing director; Noora Al-Fassam, the Kuwaiti finance minister; and Mr Al Mukhaizeem declined to comment.