English court disagrees with Tribunal in investor-state case and finds jurisdiction

English court takes a different view from the Tribunal on the meaning of “investment” and grants the s.67 UK Arbitration Act challenge.

The meaning of “investment” and the interpretation of a “measure directly applied” to that investment were the subject of consideration by the English High Court in a decision rendered on 20 June 2025. The case concerns a challenge brought by the claimant in an investor-state arbitration under s.67 of the UK Arbitration Act 1996 against the Tribunal’s finding that it lacks jurisdiction to consider the case. The Tribunal had reached this decision by narrowly interpreting the term “investment”. The Court disagreed.

Background

In 1961, the Government of Andhra Pradesh (“GoAP”), an Indian state, incorporated Andhra Pradesh Mineral Development Corporation Limited (“APMDC”). In 2005, the Government of Ras Al Khaimah (“GoRAK”), a UAE emirate, established Ras Al Khaimah Investment Authority (“RAKIA”). In February 2007, GoAP entered a Memorandum of Understanding (“MOU”) with GoRAK shortly after “a high-level meeting”, during which “it was decided to establish Alumina and Aluminium Industry in the State of Andhra Pradesh”. The gist of the MOU was that RAKIA would establish an Indian company to develop the refinery and smelter, and GoAP would direct APMDC to supply bauxite to the refinery.

RAKIA subsequently established ANRAK Aluminium Ltd (“ANRAK”), initially holding 30% of its shares, with the remaining 70% held by the Indian company Penna Cement Industries Limited. In 2009, RAKIA’s stake decreased to about 12%, and in 2010, it pledged its shares in ANRAK as security to raise finance for the project.

In August 2008, GoAP issued Order 222, establishing a committee that recommended APMDC to enter into a Bauxite Supply agreements with aluminium companies. In October 2008, by its Order 289, GoAP, approved a Bauxite Supply Agreement (“BSA”) between APMDC and ANRAK, and the BSA was concluded.

By 2013, the refinery was built. That same year in December, a bilateral investment treaty (“BIT”) was signed between India and UAE. Article 1.8 of that BIT defined “Measure” as “any form of binding action taken by a Contracting Party under any law, rule or regulation and applied directly to an Investment”.

In April 2016, by its Order 44, GoAP cancelled Orders 222 and 289. And in November 2016, APMDC formally cancelled the BSA.

The Tribunal’s award

The main issue in the dispute was whether the actions of GoAP constituted a “measure … applied directly to an Investment”. The Tribunal found that they did not, because although the measure directly affected APMDC and ANRAK, it only indirectly affected RAKIA’s shares in ANRAK. That, in the Tribunal’s opinion, was fatal to the investor’s case.

The High Court’s judgment

The High Court disagreed with the Tribunal. The Court first observed, in paragraph 106, that “[t]he analysis used by the Tribunal reflects the familiar and important line of thought that, generally speaking, loss caused to a company is not loss caused to its shareholders when the question is which of the company, on the one hand, or its shareholders, on the other hand, may claim against a person who has caused loss to the company. . . . It respects the common law principle that does not allow claims for reflective loss.” Then, however, the Court discarded this view holding in paragraphs 107 and 108 that “in the context of the BIT and its Article 10, the lens is different…. There is no claim of a company in which an Investor has shares. The only relevant claim for consideration is that of the Investor. . . .”

So, what was the nature of RAKIA’s investment? Responding to this question, the Court said in paragraph 85 that “RAKIA did not invest rights under the MOU. It did not have an interest in the refinery and plant that could be described as an asset. Its work as a sponsor and with Penna Cement was not an asset. The basic answer to the question is, in my judgment, it invested US$42.5 million, the shares and the pledge of shares in the territory of Andhra Pradesh.”

Finally, finding that the Investment under this BIT is more than a bare asset, the Court held in paragraph 109 that “[i]n this context the difference between ‘direct’ and ‘indirect’, and between ‘application’ and ‘effect’, is, in my judgment, not to be found between what is done to a company and the consequences for its shareholders. Rather, the difference is to be found between what is done that is applied directly to the Investment and what is done that has indirect or no application. This is not to treat the assets of a company as those of a shareholder (and here, a minority shareholder)”.

Conclusion

The case demonstrates the willingness of the English courts to look at the substance of investor-state arbitration awards and make robust decisions, even if this requires them to set such awards aside.

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