CL-2022-000304 - [2025] EWHC 1553 (Comm)

In the present case, and assuming “that APMDC [Ltd]’s repudiation of the BSA can be treated as an act of” the Government of Andhra Pradesh, the Tribunal concluded that “the acts in question … were directly applied only to APMDC [Ltd] and ANRAK [Aluminium] Ltd.” (The reference was to the two contracting parties to the BSA.)

It helps in the present case to keep in mind that RAKIA’s “Investment” was not simply a shareholding. It was (in the manner explained above, and over time) a number of things: US$ 42.5 million, and shares in ANRAK Aluminium Ltd, and the pledge of shares. These were invested in the proposed establishment of an Alumina and Aluminium Industry in the State of Andhra Pradesh.

In the Tribunal’s view, ‘direct application’ to ANRAK Aluminium Ltd was not direct application to shares in ANRAK Aluminium Ltd. As seen, in its view the shares were the “Investment”. On its analysis, in relation to the shareholding “the acts in question” had “an indirect effect”, and that was not enough. India’s argument led by Mr Samuel Wordsworth KC, with Mr Siddharth Dhar KC and Mr Peter Webster, supported the Tribunal’s analysis,

With true respect to the Tribunal, I cannot accept that its analysis is the analysis that applies and concludes the matter in the context of the BIT in this case.

The 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. The analysis of the Tribunal recognises separate corporate personality (India cites the decision of the ICJ in Barcelona Traction; ICJ Rep. 1970, and draws attention to paragraph (c) of Article 31(3) of the Vienna Convention (above)). It respects the common law principle that does not allow claims for reflective loss.

But in the context of the BIT and its Article 10, the lens is different, in my judgment. There is no claim of a company in which an Investor has shares. The only relevant claim for consideration is that of the Investor.

As seen earlier, as a matter of interpretation of the BIT, the mere existence of an asset of a type listed in Article 1.1 of the BIT does not mean that the asset is an “Investment”. It has to have the quality of an investment. So also, the ‘direct application’ that matters for the purpose of Article 1.8 is not simply to an asset, but to an asset as an investment (“applied directly to an Investment”).

In 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).

India highlights the presence of two elements to the requirement that action is “applied directly”: that the binding action be “applied to” the Investment, and that the application be direct. In the present case both elements are in my judgment met.

There was application to the Investment in that the action was applied to the proposed establishment of an Alumina and Aluminium Industry in the State of Andhra Pradesh. And in GOM 44 the Government of Andhra Pradesh acted directly to end the supply of bauxite and with that the establishment of an Alumina and Aluminium Industry in the State of Andra Pradesh. (India points to evidence that the refinery is operating using alternative sources of bauxite, but that does not affect the position at the time.)

The action taken was not an action directed elsewhere but having adverse collateral effects here. RAKIA’s argument puts things in this way, and correctly in my view: Measures are applied directly to an investment where they are targeted at the investment. The position may be different with measures of wider, general, application that may or do have an adverse effect on the investment in hand but on assets invested elsewhere too.

The result is a balance. It is one thing to include an offer to arbitrate that is addressed to executive action that does not apply more widely; it is another to do so where it would inhibit wider executive action.

India recognises that “it is true that one of the areas of concern as to investment treaties and investment treaty cases has been the potential impact of the state’s right to regulate” but says that “such general concerns tell one nothing about the object and purpose of this Treaty”. However, here the BIT brings in the word “direct” and it is legitimate to ask why, when seeking to understand it and to provide a faithful interpretation of the BIT.

I accept that the difference may not always be straightforward to see, as India urges. However, that difficulty comes with the choice to use the word “directly” in the BIT, important though that choice may have been to the parties. India suggests that there are difficulties in reconciling Articles 7.4 and 14.2 of the BIT but I consider the working of those provisions is not affected by an appreciation that to be a Measure (as defined) an action will be targeted (that is, directed). In any event Article 14.2 serves as a provision for the avoidance of doubt.

Standing back, the Tribunal’s analysis would in practice mean that a major form of investment structure fell outside the compass of the BIT without apparent reason for that choice. 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”.

Of course, it is possible for parties to a BIT to intend that effect, but there is no explanation why they should or did with the BIT in this case. By its preamble the BIT referred to creating “conditions favo[u]rable for fostering greater Investment by Investors of one Contracting Party in the territory of the other Contracting Party”. India points to some limited examples of binding action that could be taken, applying directly to shares, but these do not save its interpretation, and the Tribunal’s interpretation, from the problem just mentioned.

I turn to some ancillary points.

First, both parties sought to draw assistance for their argument from Article 7 of the BIT. I do not think one can draw reliably from Article 7 in the present context. “Measures” having been defined as “binding action … applied directly” in Article 1.8, Article 7.1 refers to “direct or indirect Measures”. But it is perhaps to note that in contrast to the Tribunal’s conclusion, Article 7.3 contemplates the payment of compensation where investors of one Contracting Party own shares in a company incorporated in the territory of the other Contracting Party and the assets of the company are expropriated by that other Contracting Party.

Second, there are grounds for thinking, discussed by the Tribunal at paras 94-95 in the Award, that the drafting of the BIT may have been at a point when it was accepted that some treaty provision was needed for the time being pending the development of further treaty provision that would be suitable for wider application or in the longer term. This does not advance matters in my view.

Third, I was invited by RAKIA to take into account what might be drawn from other engagement at the time. This involved India and the United Arab Emirates over Etihad and Jet Airways, against the background of the consequences of a ruling of the Supreme Court of India in 2012 in respect of Etisalat. I have looked at the material available as asked but need not consider the invitation further in light of the conclusions I have already been able to draw without accepting it.

Fourth, there is material that I have not seen because the parties differ on what disclosure India should make. RAKIA asks that inferences be drawn against India as a result, but again I do not need to take that course. In any event, the breadth of consideration invited by RAKIA might not have been possible: see JTI Polska sp. Z o.o and others v Jakubowski(above) at [32]-[36] per Lord Hamblen JSC.