Minority Shareholdings Under the India–UAE BIT: Direct Application Is Not Confined to Action Against the Shares

1. Introduction

This judgment addresses a central question in investment treaty arbitration: when a foreign investor holds shares in a local company, can executive action against that company’s business apply “directly” to the investor’s investment, even though it does not legally operate on the shares themselves?

The Court of Appeal answered yes under the particular wording of the bilateral investment treaty between India and the United Arab Emirates signed on 12 December 2013 (“the BIT”). A shareholding acquired in exchange for capital retains the character of the investment made in the underlying project. Direct application therefore cannot be assessed solely by asking whether governmental action changes the investor’s legal rights as a shareholder.

The respondent, Ras Al Khaimah Investment Authority (“RAKIA”), held a minority shareholding in ANRAK Aluminium Limited (“ANRAK”), an Indian company established to develop an alumina and aluminium business in Andhra Pradesh. Executive action affecting its essential bauxite supply arrangements led RAKIA to commence arbitration against India. The dispute before the English courts concerned the tribunal’s jurisdiction, not whether India had ultimately breached the BIT or owed compensation.

The decision is carefully bounded. It does not make ANRAK’s assets RAKIA’s property, remove the treaty’s requirement of direct application, or establish that every governmental action reducing share value is arbitrable.

2. Background and Treaty Framework

The investment and the disputed executive action

A 2007 memorandum of understanding between the Government of Andhra Pradesh and the Government of Ras Al Khaimah contemplated an industrial project involving a refinery, smelter and power plant. Andhra Pradesh Mineral Development Corporation (“APMDC”), a state-owned company, was to supply locally mined bauxite to ANRAK.

RAKIA invested US$42.5 million in ANRAK. Its participation was initially approximately 30%, later reached 33%, and eventually fell to about 12% because it did not match further equity contributions by Penna Cement Industries Ltd. RAKIA also pledged its shares to support substantial lending to ANRAK.

APMDC and ANRAK entered into a bauxite supply agreement (“the BSA”) in October 2008, conditional on the necessary permissions. ANRAK subsequently constructed a refinery and captive power plant. After important clearances were obtained in 2015, public opposition prompted the state government to reverse its position. In April 2016, executive order GOM 44 purported to nullify the earlier orders authorising APMDC to enter into the BSA. APMDC later gave notice cancelling that agreement.

RAKIA alleged that the resulting loss of the contemplated bauxite supply left the refinery unemployed and breached the BIT’s investment protections. India maintained that the refinery had operated using alternative bauxite supplies from 2017. The Court of Appeal held that permanent destruction of the project was not necessary to establish jurisdiction.

The provisions controlling jurisdiction

The interaction between Articles 1.1, 1.8 and 10.2 was decisive: the court had to identify RAKIA’s protected assets and decide whether the challenged executive action applied directly to that investment.

3. Summary of the Judgment

The London-seated UNCITRAL tribunal had declined jurisdiction. It assumed that binding executive acts caused loss to ANRAK and reduced the value of RAKIA’s shares, but considered that those acts applied directly only to ANRAK and APMDC. Their effect on RAKIA’s investment was, in its view, indirect.

On RAKIA’s challenge under section 67 of the Arbitration Act 1996, Robin Knowles J set aside the award and remitted the dispute for determination on its merits. India appealed.

The Court of Appeal unanimously dismissed the appeal. Its principal conclusions were:

• The investment remained asset-based. The project itself was not an additional asset belonging to RAKIA. The cash investment had changed form into shares, without double counting.
• ANRAK’s assets were not RAKIA’s investment merely because it held shares. In particular, RAKIA could not treat the BSA as its own indirectly held asset on the facts of this minority, non-controlling participation.
• Direct application was not confined to action legally operating on the shares. The shareholding retained the character of the capital investment made in the industrial project.
• The challenged executive action applied directly to that investment. It ended the availability of the project’s primary bauxite supply and led to termination of the relevant supply contract.
• The High Court’s targeted-versus-general distinction was not adopted. Generally applicable regulation can also apply directly to an investment.
• An abandoned alternative argument could not be revived. The court refused permission to argue that Article 10 contained a freestanding arbitration offer independent of the defined concept of a “Measure”.

The High Court’s order setting aside the jurisdictional award and remitting the dispute therefore remained in place. No final determination was made on treaty liability or damages.

4. Legal Reasoning

A. Identifying the investment without confusing it with the project

India’s first appeal ground alleged that the High Court had wrongly treated RAKIA’s investment as the entire industrial project rather than its minority shareholding. The Court of Appeal rejected that reading of the judgment.

The High Court had expressly distinguished the assets invested from their commercial setting. Describing RAKIA as investing in an alumina and aluminium project explained why its contribution had the quality of an investment; it did not enlarge the assets it owned. RAKIA’s original cash contribution was replaced by shares. Those were successive forms of the investment, not simultaneous assets to be added together.

This distinction is essential. A treaty may protect an investment in a business without treating a shareholder as the legal owner of the business’s individual assets. The court maintained that boundary while rejecting an unduly formalistic approach to direct application.

B. The pledge issue remained unresolved by the majority

Phillips LJ considered that pledging shares to secure ANRAK’s borrowing generated a further investment through associated rights of subrogation or indemnity against ANRAK. With no evidence of Indian law on those rights, he proceeded on the assumption that equivalent English-law rights arose.

However, Males LJ and Miles LJ expressly reserved their positions. Males LJ noted the limited argument and the absence of any practical addition to the straightforward shareholding case.

The judgment therefore does not establish a binding majority conclusion that the pledge itself constituted a separate protected Investment. The jurisdictional result rested sufficiently on the shares.

C. Why the BSA was not itself RAKIA’s investment

RAKIA alternatively argued that its protected investment included ANRAK’s contractual rights under the BSA. This would have provided a simpler jurisdictional route because direct application of the executive action to that contract was undisputed.

The court rejected the argument. Authorities protecting investments made through intermediary companies commonly involved entities owned or controlled by the claimant investor. RAKIA, by contrast, held only about 12% of ANRAK at the relevant time and neither owned nor controlled it. It could not describe itself as the indirect owner of ANRAK’s assets.

The reasoning should not be converted into a universal numerical threshold. The court did not establish a comprehensive rule for every minority investment or corporate structure. It held that the authorities relied upon did not justify attributing ANRAK’s assets to RAKIA in this case.

D. The investment’s continuing character was decisive

India’s central submission was that action applies directly to shares only if it operates on the shares themselves—for example, by expropriating them, restricting their transfer or limiting dividend rights. Action against corporate assets, however damaging to share value, would remain indirect.

The court rejected that interpretation by reading the BIT as a whole. Article 8 contemplated capital entering the host state; Article 3.2 encouraged investors to establish appropriate legal entities for investment projects; and Article 1.1 preserved an investment’s character when its form changed.

The final provision supplied the critical link. Capital contributed to establish a business ordinarily ceases to belong to the investor and is replaced by shares or other rights. Nevertheless, the resulting shareholding retains the character of the assets invested in the host state. Direct application must therefore be assessed by reference to the investment represented by the shares, not merely the legal incidents of the shares in isolation.

The court illustrated the problem with India’s interpretation through an immediate expropriation example: if an investor capitalised a company and the government then confiscated that capital from the company, an ordinary good-faith understanding would regard the action as applying directly to the investment. Treating the shares as the only relevant legal object would obscure the transaction’s investment substance.

Applied here, the executive action operated on the essential supply arrangement for the project in which RAKIA’s capital had been invested. It could therefore apply directly to RAKIA’s investment without the BSA becoming RAKIA’s own asset.

E. Direct application is not the same as selective targeting

The Court of Appeal did not endorse the High Court’s suggestion that direct application depended on an action being targeted at a particular investment rather than having wider application.

An industry-wide measure can apply directly to every investment within its scope. Moreover, Article 7.4 expressly addressed regulatory measures, while Article 14.2 contemplated generally applied emergency measures. A categorical exclusion of general regulation would sit uneasily with that wording.

The relevant contrast was instead with indirect or consequential application of action directed elsewhere. Cancellation of the bauxite supply arrangement could apply directly to RAKIA’s investment while producing only consequential effects on separate transport, service or other businesses supporting the operation.

The court acknowledged that the boundary would not always be clear. It did not decide whether its approach was equivalent to RAKIA’s alternative formulation requiring a “direct nexus”. That phrase should not be presented as an adopted replacement test.

F. Substantive protection and consent to arbitration remain distinct

India correctly identified that treaty protections and arbitration provisions need not be coextensive. The BIT’s arbitration offer was unusually restricted: it covered relevant executive action, not legislative or judicial action, although the substantive protections were not correspondingly confined.

The court did not erase that distinction. Rather, it held that the existence of restrictions did not establish how far a particular restriction extended. India still had to justify its proposed interpretation through the treaty’s wording, context and purpose.

Article 7.3, which addresses compensation where a host state expropriates assets of a local company with foreign shareholders, supported the High Court’s contextual reasoning. But the appellate decision did not proceed on a general rule that every substantive treaty protection must be enforceable through investor-state arbitration.

G. Treaty purpose informs interpretation without creating an investor presumption

The court applied the customary international law rules reflected in Articles 31 and 32 of the Vienna Convention on the Law of Treaties 1969. Ordinary meaning, context, object and purpose form a single interpretative exercise.

The approach is even-handed: neither a presumption favouring investors nor one favouring states governs jurisdictional provisions. The court nevertheless explained that a treaty’s established investor-protection purpose may legitimately resolve a remaining uncertainty in an investor’s favour. That is an application of Article 31, not an automatic investor-friendly tie-breaker.

H. Negotiating background could not supply the missing intention

India relied on its reaction to an earlier adverse investment award and its subsequent treaty-policy review. It argued that this background explained a particularly narrow arbitration offer.

The court found the material insufficient. Negotiating minutes referred to unidentified Indian concerns about evolving international jurisprudence, while also recording the UAE’s wish to limit revisions and both governments’ priority of concluding the agreement. They did not clearly establish an agreed intention supporting India’s interpretation.

The wider lesson is that one state’s negotiating motivation does not determine the meaning of a bilateral compromise. The final agreement may reflect competing legal, commercial, economic and political considerations.

5. Precedents Cited and Their Influence

Treaty interpretation

Infrastructure Services Luxembourg SARL v The Kingdom of Spain [2026] UKSC 9, [2026] 2 WLR 581

This was the principal authoritative statement of the interpretative method. The Supreme Court required a holistic Article 31 exercise and explained the limited role of supplementary material under Article 32. The Court of Appeal used it both to structure its reading of the BIT and to reject negotiating material that did not clearly establish the asserted intention.

JTI Polska sp. z o.o. v Jakubowski [2024] AC 621 and Maritime Delimitation in the Indian Ocean (Somalia v Kenya) [2017] ICJ Rep 3

These authorities appeared within the Supreme Court passage adopted by the court. They supported treating ordinary meaning, context and purpose as a “single combined operation”, rather than beginning with a supposedly self-contained literal meaning and considering context only afterwards.

Fothergill v Monarch Airlines [1981] AC 251 and Effort Shipping Co Ltd v Linden Management S.A. and others [1998] AC 605

Also cited through the Supreme Court’s explanation, these cases identify demanding conditions for using preparatory materials to resolve ambiguity or an absurd or unreasonable result: the material must be public and accessible, and point clearly and indisputably to a definite intention. They reinforced the rejection of inference from India’s policy concerns alone. Supplementary materials cannot contradict a meaning already established under Article 31.

Republic of Korea v Elliott Associates LP [2024] EWHC 2037 (Comm) and [2025] EWCA Civ 905; Swissbourgh v Lesotho [2018] SGCA 81

Foxton J’s first-instance decision, following the Singapore Court of Appeal, rejected both liberal, pro-investor construction and restrictive, pro-state construction. Although his decision was reversed and aspects of his approach disapproved on appeal, the even-handed principle was cited without criticism. The present court preserved that neutral starting point.

Ecuador v Occidental Exploration & Production (No.2) [2007] EWCA Civ 656, [2007] 2 Lloyd’s Rep 352; SGS v Philippines (2004) 8 ICSID Reports 515

RAKIA relied on the statement in the former decision that uncertainty could permissibly be resolved in favour of investors in light of a BIT’s protective purpose. That passage had referred to the latter arbitral award. The court reconciled the statement with even-handed interpretation: purpose may tip an otherwise uncertain conclusion, but it does not create a general presumption for investors.

Czech Republic v European Media Ventures SA [2007] EWHC 2851 (Comm), [2008] 1 All ER (Comm) 531; GPF v Poland [2018] EWHC 409 (Comm)

India cited these decisions as questioning an expansive reading of the investor-favouring passage in Ecuador v Occidental Exploration & Production (No.2). Their relevance was to the danger of converting treaty purpose into a presumption. The court’s explanation avoided that result and was consistent with the secondary commentary in Mustill & Boyd: Commercial and Investor State Arbitration rejecting a general investor-favouring presumption.

Investment character, indirect ownership and corporate separateness

The Czech Republic v Diag Human SE [2024] EWHC 2102 (Comm)

The High Court relied on this authority for a holistic assessment of whether a transaction has the quality of an investment. That assessment concerns character, not asset ownership. It did not justify treating an entire commercial project as an additional asset of RAKIA.

Barcelona Traction; ICJ Rep. 1970

This authority appeared in the discussion of corporate personality and the distinction between a company’s loss and shareholder loss. The present decision did not deny that distinction. Its holding concerned the meaning of an express treaty protection for share investments, not a general displacement of corporate separateness or domestic reflective-loss principles.

Siemens v Argentina (ICSID Case No. ARB/02/8, 3 August 2004)

RAKIA invoked this award to show that interposed companies need not prevent protection of an investment. The court accepted the relevance of that reasoning to indirect investment structures but distinguished it from treating the assets of a non-controlled company as assets invested by a small minority shareholder.

Republic of Korea v Dayyani [2019] EWHC 3580 (Comm), [2020] Bus LR 884

This was RAKIA’s strongest English authority for protection of assets held through a corporate vehicle. The relevant acquisition vehicle was owned and controlled by the investors, and the treaty did not expressly require direct legal ownership. The Court of Appeal distinguished those circumstances from RAKIA’s non-controlling 12% interest. The decision supported protection through appropriate intermediary structures, not automatic attribution of all corporate assets to every shareholder.

Limits of arbitral consent and negotiating context

European American Investment Bank AG (Austria) v The Slovak Republic, PCA Case No. 2010-17

India relied on this award for the proposition that substantive treaty standards remain meaningful even when not enforceable through investor-state arbitration. The present judgment did not reject that proposition. It rejected the further inference that this general possibility established India’s particular restrictive construction of “applied directly”.

White Industries v India

The 2011 award was relied upon as background to India’s reconsideration of investment treaties, rather than as authority defining direct application. Its suggested influence on Indian policy did not establish the contracting states’ shared meaning in the 2013 BIT.

New arguments on appeal

Singh v Dass [2019] EWCA 360; Hudson v Hathway [2022] EWCA Civ 1648, [2023] KB 345

These authorities supplied the discretionary framework for admitting a new appellate point. Relevant factors include the proceedings below, the nature of the proposed argument and prejudice to the opposing party. The court held that the general approach also applies to respondents seeking to uphold a judgment on new grounds, while allowing their procedural position to be relevant.

6. The Separate Procedural Holding: Abandoned Arguments and Arbitral Finality

RAKIA sought to revive an argument that Article 10 offered arbitration independently of whether the dispute involved a defined “Measure”. The tribunal had rejected that argument, and RAKIA had expressly abandoned it before the High Court hearing.

The Court of Appeal accepted that it had jurisdiction to entertain the point. A respondent seeking to uphold an existing decision could serve a Respondent’s Notice without obtaining the permission India needed to appeal under section 67(4). The obstacle was discretionary, not jurisdictional.

The decisive consideration was the effect of abandonment on the statutory process. The High Court had not been able to determine the argument, consider an appropriate order or decide whether an appeal should be permitted. Allowing its resurrection risked circumventing the first-instance judge’s central role in the Arbitration Act’s controlled challenge regime.

The court therefore required particular caution where a new appellate argument arises in an arbitration challenge. Party autonomy and speedy finality supported refusing permission in these circumstances.

This was not an absolute prohibition on new points, nor a substantive appellate ruling that the freestanding-offer argument must fail. It was a refusal to allow that abandoned argument to be advanced.

7. Impact and Practical Significance

Protection for ordinary corporate investment structures

The judgment prevents a common investment structure—capital contributed in exchange for shares—from becoming substantially ineffective merely because state action operates on the business rather than the share register. Minority status alone does not prevent executive action from applying directly to a protected share investment.

A continuing limit on consequential claims

The decision does not make reduced share value sufficient by itself. A claimant must still establish the treaty-required relationship between the challenged action and its investment. Businesses suffering downstream commercial effects remain distinguishable from the investment to which the action directly applies.

General regulation remains potentially within scope

States cannot assume that a measure falls outside jurisdiction simply because it applies broadly rather than selectively. Conversely, direct application of regulation does not establish a treaty breach: jurisdiction, substantive justification and compensation remain separate questions.

Treaty drafting and evidence matter

The result depended particularly on the BIT’s preservation of investment character following a change of form, read alongside provisions addressing capital transfers and investment entities. It should not be mechanically transplanted into differently worded treaties. Negotiating evidence must likewise illuminate the agreed text, not merely one government’s policy preferences.

Merits issues remain open

The tribunal must still determine whether the substantive protections were breached and the consequences of any breach. The possibility of later refinery operation did not defeat jurisdiction, but may remain relevant to issues such as loss and valuation. The appellate judgment itself awarded no compensation.

8. Complex Concepts Simplified

Substantive jurisdiction

The tribunal’s authority to decide the dispute. Establishing jurisdiction does not establish that the claim succeeds.

Change of investment form

An investor pays cash and receives shares. The protected investment continues in a different form; the investor does not retain both the cash and the shares as separate items for double recovery.

Corporate personality

A company owns its assets separately from its shareholders. Share ownership does not ordinarily make the shareholder an owner of each corporate contract or property.

Reflective loss

A fall in share value reflecting loss suffered by the company. The judgment concerned protection under this BIT, not a general rewriting of domestic rules governing shareholder claims.

Direct application versus economic effect

A measure may directly concern the investment represented by shares without legally altering those shares. But commercial harm caused by action directed at another investment may be only consequential.

Travaux préparatoires

Preparatory treaty materials, such as drafts and negotiating records. Their interpretative use is limited and cannot override a meaning established by the treaty’s text, context and purpose.

Respondent’s Notice

A procedural means by which a successful party asks an appeal court to uphold the result on additional or different grounds. It does not guarantee permission to revive an abandoned argument.

9. Conclusion

The judgment establishes that, under the India–UAE BIT, direct application to a minority share investment is not confined to executive action legally operating on the shares themselves. The court must consider the continuing investment character of the capital represented by those shares.

At the same time, the court preserved important limits: the project and company assets did not become RAKIA’s property, consequential harm remained distinct from direct application, and the pledge issue was left unresolved by the majority. Its procedural ruling also reinforces the importance of presenting jurisdictional arguments fully at first instance.

The outcome restores the tribunal’s authority to hear the dispute—not a finding that India breached the treaty.