The Commercial Court has ruled that a UNCITRAL tribunal was wrong to decline jurisdiction over an investor-state claim. In doing so, it disagreed with the tribunal’s own decision that it did not have jurisdiction to hear the dispute.
It is rare for jurisdictional challenges brought under section 67 of the Arbitration Act 1967 to be successful. In fact, only one of these applications was successful in 2023 -2024 according to The Commercial Court Report of that year. It reports that 24 jurisdiction applications were filed during the year, and only one of those was successful (though 13 remained pending at the time of the report). In the previous year, 7 jurisdictional challenge applications were received and none were successful.
These challenges are not straightforward, and the Court often does not want to over-step its supervisory function in arbitration. However, in this case, the Commercial Court disagreed with the Tribunal’s reasoning.
The effect is that the claimant’s claim is revived, so that the merits of the substantive claim can be considered by the tribunal.
Brief background facts
The investing authority in this case is the Emirati entity, Ras Al Khaimah Investment Authority (“RAKIA”). RAKIA brought claims against the government of the Indian state of Andhra Pradesh relating to a cancelled bauxite supply deal. It sought $273 million in damages.
In May 2022, the UNCITRAL tribunal unanimously dismissed the case saying it lacked jurisdiction of the Bilateral Investment Treaty.
RAKIA brought a challenge before the Commercial Court under section 67 of the Arbitration Act 1996.
The BIT
The relevant Bilateral Investment Treaty was between the Government of India and the Government of the United Arab Emirates and dated 12 December 2013 (“the BIT”). It was an agreement “on the promotion and protection of investments”.
RAKIA was an investor in the aluminium enterprise, and alleged that a number of provisions in the BIT were breached when bauxite was not supplied and the bauxite supply agreement (BSA) was cancelled as these were governmental acts attributable to India.
India denied that there were any such breaches and said that in any event the Tribunal lacked jurisdiction. It said that the provisions of the BIT for arbitration at the instance of the investor did not apply to this case.
The tribunal agreed with India’s case on jurisdiction. It said that Article 10 of the BIT applied only when the dispute arose out of measures taken by the Governments of India or Andhra Pradesh and that those measures must have been applied directly to the claimant’s investment.
In the tribunal’s view, the acts in question had only an indirect effect on RAKIA’s investment and so the tribunal did not have jurisdiction.
RAKIA’s investment
In this case, it was important to keep in mind that RAKIA’s “Investment” was not simply a shareholding.
It was a number of things:
- rights under the MoU and
- cash distributions of over US$ 42.5 million, and
- shares in ANRAK Aluminium Ltd, and
- its interest in the refinery and plant overall
- the pledge of shares.
These were invested in the proposed establishment of an Alumina and Aluminium Industry in the State of Andhra Pradesh.
Tribunal’s decision: Shares are the investors’ assets, not the assets of the company
Although “Investment” was widely defined in the BIT the asset had to be the asset of the Investor. The Tribunal decided that assets of a company in which an Investor held shares were not an asset of the Investor. Rather, the shares were the asset of the Investor.
The repudiation of the BSA could be assumed to be treated as an act of the Government of Andhra Pradesh, that it caused loss to ANRAK Aluminium Ltd and thereby diminished the value of RAKIA’s shares in ANRAK Aluminium Ltd.
Although the acts in question had an indirect effect on RAKIA’s investment, they were directly applied only to APMDC Ltd and ANRAK Aluminium Ltd.
The Tribunal said that it followed that it did not have jurisdiction and the claim must be dismissed.
The court’s decision: The lens is different
However, the court considered that shares are an “asset” under the BIT. RAKIA received shares in ANRAK Aluminium Ltd in return for all or some of the money. It may not be easy to see that it “invested” those shares by receiving them, but the court said that the point did not matter because the money was invested.
The analysis used by the Tribunal reflects the line of thought that loss caused to a company is not loss caused to its shareholders. This is in the context of whether a company, or its shareholders may claim against a person who has caused loss to the company.
But in the context of the BIT and its Article 10, Mr Justice Knowles said that “the lens is different”. There is no claim of a company in which an investor (under the BIT) has shares. The only relevant claim for consideration is that of the investor.
In this context the difference between ‘direct’ and ‘indirect’, and between ‘application’ and ‘effect’, 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.
Incentivising investment
Standing back, the Tribunal’s analysis meant that investors would be advised to avoid investing that took the form of establishing and taking shareholdings in companies incorporated in “the territory of the other Contracting Party”.
This could be what the parties meant in the BIT. But Mr Justice Knowles referred to the preamble which made it clear that the parties wanted to create “conditions favourable for fostering greater Investment by Investors of one Contracting Party in the territory of the other Contracting Party”.
That was wide enough to include the way in which RAKIA had invested.
Read the full decision here: Ras Al Khaimah Investment Authority v Republic of India [2025] EWHC 1553 (Comm)
Analysis
The decision means that RAKIA can continue its claim through arbitration and the tribunal may decide the merits of the dispute.
In a wider context, this decision shows that the Commercial Court embraces its role in dealing with investor-state disputes, which are complex. While the Court shows sufficient deference to the tribunal, it is not constrained by a tribunal’s own view of its jurisdiction.
