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

The language of bilateral investment treaties may differ from one to the next. It is important to keep closely in mind that the BIT in the present case has the definitions of “Investment” and “Measure” that it does, and combines them in the way it does in Article 10.

The definition of “Investment” in the BIT is concerned with assets “invested … in the territory of” the “other Contracting Party”.

As RAKIA describes it, the definition of “Investment” in Article 1(1) of the BIT is structured by way of a “chapeau” couched in broad terms as “every kind of asset invested by the Investors”, followed by a non-exhaustive list of examples. I agree with RAKIA that the broad scope of the “chapeau” is not reduced by the fact that a non-exhaustive list of examples then follows in Article 1(1).

As the Tribunal’s decision shows, the question that lies ahead in the present case is whether “Measures” were “applied directly” to the Investment. For that reason, it will be important to establish not simply whether there was an “Investment” but the full extent of the assets “invested”.

As the Tribunal pointed out, in its Statement of Claim in the arbitration RAKIA itself alleged that its investment was the shares in ANRAK Aluminium Ltd. But RAKIA’s argument developed after that stage, including in its Reply in the arbitration.

As developed RAKIA has argued:

“RAKIA’s investment was in the project as a whole, rather than a specific aspect of it. It included: rights under the MoU; cash contributions of over USD 42.5 million; shares in ANRAK [Aluminium Ltd]; the pledge of these shares to obtain loans (allowing ANRAK [Aluminium Ltd] to raise hundreds of millions of dollars in further financing); and its interest in the refinery and plant overall.”

It has referred also to RAKIA’s “implement[ing] the project acting as a sponsor” and “finding and working with a local partner [Penna Cement]”. In its written argument for this hearing RAKIA argues that a “constellation of linked elements” constituted the “Investment”.

In the present case, two states (Andhra Pradesh and Ras Al Khaimah) decided by their Governments “…to establish Alumina and Aluminium Industry in the State of Andhra Pradesh”. To that end, an Indian company (ANRAK Aluminium Ltd) would be set up by the investment authority (RAKIA) of one state (Ras Al-Khaimah) and identify suitable land for the establishment of the plant required. The other state (Andhra Pradesh) would direct its development company (APMDC Ltd), to supply bauxite from deposits that could not be mined privately.

What did RAKIA invest and invest “in the territory of the other Contracting Party” that was an “asset”?

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.

RAKIA received shares in ANRAK Aluminium Ltd in return for all or some of the money. Shares are an “asset” (under Article 1.1(ii)). It may not be easy to see that it “invested” those shares by receiving them. However, the point does not matter because the money was invested and also because Article 1.1 adds: “Any change of the form in which assets are invested or reinvested does not affect their character as Investment”. The provision recognises change and there is no “double counting”.

As to the pledge of shares, a pledge is an “asset” under Article 1.1(i). It is not difficult to conclude that RAKIA invested the shares when it pledged them to enable ANRAK Aluminium Ltd to borrow.

There are of course cases where the question is whether in the particular circumstances of the case an asset is in fact an investment, but this is not one of those. I do not consider any of the cash, shares or pledge can be treated other than as an investment. The Tribunal was right to say that RAKIA’s shares in ANRAK Aluminium Ltd were an “investment in India”.

As noted, RAKIA describes its “Investment” as “in the project as a whole, rather than a specific aspect of it” and refers to “the operation of the overall project, as well as” its component parts. RAKIA argues that its interpretation, of the Investment being in the project as a whole, is the interpretation that gives the terms of the BIT their ordinary meaning in their context and in light of the BIT’s object and purpose.

In my judgment, these descriptions provide a characterisation that helps confirm that the assets invested by RAKIA were investments. They do not add to what the assets invested were.

RAKIA seeks to draw on the approach identified by Foxton J in Czech Republic v Diag (above) at [85] where he said:

“But generally, I am persuaded by the view that the issue of whether there is an investment should be looked at holistically rather than by considering different components of an integrated activity in isolation, at least where the claim relates to that holistic investment.”

See also [132].

At least generally speaking (and Foxton J himself uses the word “generally”), I very much agree with the approach, but on my understanding the importance of the reference to a holistic approach is to “the issue of whether there is an investment”. Where, as here, a definition of “Investment” is involved that is confined to “assets” the holistic approach does not treat as an Investment something that is not an asset.

Foxton J gave the example of a case where “… the tribunal held that the offtake contract in issue in that case was a contract for sale and delivery, and not an investment even if a holistic approach was adopted to the issue of whether there had been an investment.” Not every purchase of shares in a company incorporated in India to undertake business in Andhra Pradesh will have the quality of investment with which a bilateral investment treaty is concerned.

However that quality in the present case is readily seen: RAKIA’s incorporation of ANRAK Aluminium Ltd and shareholding in ANRAK Aluminium Ltd was the modality by which RAKIA invested money in the project that the MOU had described and begun, i.e. “to establish Alumina and Aluminium Industry in the State of Andhra Pradesh”.