Court of Appeal Allows Foreign Investor to Pursue Arbitration Against India
In a recent ruling, the Court of Appeal in England has enabled a UAE investment authority to continue its arbitration case against the Indian government regarding a troubled aluminium project. The court found that the government’s actions, which led to the cancellation of a key supply agreement, significantly impacted the investment protected under international law.
On October 22, the court dismissed India’s effort to stop the arbitration process, affirming that foreign investors retain protections under international treaties, even if issues arise with the local company they invest in, rather than the investment itself.
This case has origins that stretch back over a decade, involving the Republic of India and the Ras Al Khaimah Investment Authority (RAKIA) concerning plans for an aluminium business in Andhra Pradesh, India.
In 2007, the Indian state government partnered with RAKIA to develop a $2 billion aluminium project that included a refinery, smelter, and power plant. RAKIA initially invested $42.5 million in ANRAK Aluminium, the Indian company created for this project, although its stake eventually decreased to about 12%.
A critical part of this agreement was a contract with a state-owned company to supply bauxite, the essential raw material for aluminium production. However, after public protests, the Andhra Pradesh government reversed its earlier approval, leading to the termination of this crucial supply agreement in 2016.
RAKIA argued that these governmental actions harmed its investment and violated a bilateral investment treaty signed between India and the UAE in 2013, which includes protections against unfair treatment and wrongful expropriation.
The investment authority initiated arbitration proceedings in London in December 2016. However, in May 2022, the tribunal ruled it lacked the authority to hear the case, stating that while the cancellation hurt ANRAK and diminished the value of RAKIA’s investment, the actions were directed at the company rather than directly affecting RAKIA’s investments.
RAKIA contested this decision in English courts, leading to a more favorable ruling in June 2025, when Mr. Justice Robin Knowles instructed the tribunal to reconsider the case.
The appeal primarily revolved around the precise language of the India-UAE investment treaty, which allows for arbitration concerning government actions “applied directly to an Investment.” India maintained that RAKIA’s investment was merely its minority share in ANRAK, and therefore, any effects stemming from government actions were indirect.
Conversely, RAKIA argued this viewpoint was overly narrow and highlighted that its shares were indeed the investment vehicle for the aluminium project, making the government’s cancellation of the supply agreement a direct blow to its investment.
The Court of Appeal ultimately sided with RAKIA, dismissing India’s appeal. Lord Justice Phillips noted that while RAKIA’s shares constituted the protected asset, it was unnecessary for government actions to be explicitly directed at those shares to qualify for protections under the treaty.
He illustrated the pitfalls of India’s interpretation by theorizing a scenario where a government confiscates an investor’s funds, suggesting that under India’s reasoning, the investor would have no direct claim under the treaty because the act was against the company and not the investor directly. The court found this interpretation untenable and counterproductive to investor protections.
However, the Court did offer a different perspective on how to differentiate between direct and indirect impacts on an investment. The previous ruling had emphasized whether government actions specifically targeted an investment. Lord Justice Phillips argued that the key factor should be whether the action had a direct effect on the investment, regardless of targeting.
The dispute will now be sent back to the London tribunal, which operates under UNCITRAL rules, to resolve whether India violated its treaty obligations.
In the case titled Republic of India (appellant) v Ras Al Khaimah Investment Authority (respondent), the legal teams included representatives from Essex Court Chambers and Freshfields, illustrating a significant legal battle between international investment entities and government actions.
