UK avoids Rwanda compensation payout over scrapped asylum plan

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UK avoids Rwanda compensation payout

Highlights

International Court of Arbitration in The Hague unanimously rules that the UK owes no compensation to Rwanda for cancelling the asylum deal, rejecting Rwanda's £106mn claim.
UK Labour government terminates the £700mn Rwanda policy after only four asylum seekers go to Rwanda, following the Supreme Court's ruling the scheme unlawful.
Home secretary Shabana Mahmood announces tighter UK immigration rules, limiting successful asylum applicants to temporary leave and extending the route to indefinite leave to 10–20 years.

Hague ruling closes compensation dispute

As reported by Financial Times, the International Court of Arbitration in The Hague rules that the UK does not have to pay Rwanda compensation for cancelling the previous Conservative government's plan to send asylum seekers to the east African country. A three-judge panel unanimously rejects four of Rwanda's five claims and dismisses the fifth by majority, with one dissenting opinion.

Rwanda had sought £50mn for the second year of the agreement and another £50mn for the third year, or alternatively £10.4mn for that year to reflect the timing of the cancellation. It also seeks either £6mn or an apology for what it says are breaches of the deal.

In a dissenting opinion, Egypt's Mohamed Abdel Wahab says the UK should have been required to pay £50mn for the second year of the arrangement. Had Rwanda won the full £106mn, the amount would have equalled about 7 percent of the country's RwFr7.8tn, or £3.98bn, budget for 2026-27.

Migration policy fallout and broader border changes

The agreement, struck under former prime minister Rishi Sunak, is presented as a wider package under which the UK invests in Rwanda while Kigali processes asylum claims on behalf of the British government. The plan is designed to deter small boat crossings in the English Channel, but it is highly controversial because even people found to have fled persecution or danger in their home countries would have permission to remain only in Rwanda, not in the UK.

The UK Supreme Court had previously ruled the scheme unlawful, and Prime Minister Sir Keir Starmer cancels it shortly after Labour wins the general election in July 2024. Labour says the policy costs more than £700mn, yet only four people ever go to Rwanda to have their claims considered, all of them volunteers who accept payments of up to £3,000 each.

After the ruling, the UK government says it has robustly defended its position and remains focused on reforms aimed at restoring order and control to the country's borders. Rwanda says it respects the award and considers the matter concluded, while noting that the dissenting and separate opinion shows the legal questions are complex and open to different conclusions.

The decision comes as the UK government pursues wider immigration changes. Home secretary Shabana Mahmood announces in November that successful asylum applicants will receive only temporary leave to remain, subject to regular reviews, while the route to indefinite leave to remain is being extended from a typical five years to 10, 15 or 20 years.

In our earlier article on UK business sentiment surveys, we noted that companies remained downbeat about the near-term economic outlook as demand stayed weak and geopolitical tensions added to cost pressures. The CBI’s output expectations and recent output balances were still deeply negative, while a separate IoD reading suggested a modest improvement in confidence among smaller firms despite the broader gloom.

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