RAKIA v Republic of India [2025] EWHC 1553 (Comm): English Court reasserts jurisdictional review power over BIT arbitrations

1. Introduction

In RAKIA v Republic of India [2025] EWHC 1553 (Comm), the High Court of England and Wales has overturned a tribunal’s ruling declining jurisdiction under the India–UAE Bilateral Investment Treaty (BIT), marking a significant development in the interpretation of investment protections and the scope of judicial review under the Arbitration Act 1996. The decision is likely to resonate across the investment arbitration landscape, particularly in jurisdictions where arbitration is seated in England.

2. Factual Background

The Ras Al Khaimah Investment Authority (RAKIA), an investor from the United Arab Emirates, brought arbitration proceedings against India under the India–UAE BIT. RAKIA had invested in a bauxite mining and aluminium project in Andhra Pradesh through an Indian joint venture (JV) company, in which it held shares and into which it injected capital.

Following local opposition and tribal resistance, the Government of Andhra Pradesh cancelled mining leases essential to the project through Government Order 44 (GOM44). RAKIA alleged that this amounted to a state measure attributable to India and that the cancellation constituted a breach of the BIT.

The BIT conferred jurisdiction under Article 10 to arbitral tribunals for:

"Disputes arising between a Contracting Party and an Investor of the other Contracting Party in respect of an Investment..." and specifically included measures “taken by the Central Government and/or the state governments while exercising their executive powers.”

3. The Tribunal's Decision

An UNCITRAL tribunal, chaired by Lord Hoffmann, dismissed RAKIA’s claim for want of jurisdiction. The tribunal accepted India’s submission that the relevant governmental measures were not “directly applied” to RAKIA’s investment (i.e., its shareholding in the JV company) but rather affected the JV company itself. According to the tribunal, this amounted to an indirect effect on RAKIA’s investment and thus fell outside the scope of Article 10.

4. The High Court's Judgment

RAKIA challenged the tribunal’s ruling under section 67 of the Arbitration Act 1996, which permits de novo judicial review of jurisdictional issues. The Commercial Court allowed the appeal.

A. Broad Interpretation of "Investment"

The Court found that the BIT defined “Investment” broadly to include “every kind of asset,” including shares, cash contributions, and pledged rights. RAKIA’s shareholding and capital contributions to the JV constituted qualifying investments.

B. Reframing "Direct Application"

In a central aspect of the judgment, the Court rejected the tribunal’s narrow formalistic approach to the concept of “direct application.” It held that where a state measure is aimed at the project into which an investor has placed capital, such measure is “directly applied” to the investment. The measure need not be addressed to the investor per se.

The Court emphasised that the BIT did not require the impugned acts to be legally targeted at the investor itself; rather, it sufficed that the measures materially affected the investor’s asset—the investment project—as a matter of substance.

C. Vienna Convention Principles

Applying Articles 31 and 32 of the Vienna Convention on the Law of Treaties, the Court endorsed a good faith, purposive construction of the BIT. The tribunal’s strict construction, in the Court’s view, would render large classes of shareholder investments ineligible for treaty protection—an outcome inconsistent with the treaty's object and purpose.

5. Significance and Commentary

This case underscores several key points for investor-state arbitration and English-seated tribunals:

1. Judicial Oversight of Jurisdiction: The decision affirms that English courts retain full power to review jurisdictional decisions under s.67, even in investment treaty arbitrations. Tribunals seated in England cannot shield jurisdictional determinations from judicial scrutiny.
   
   
2. Substantive, Not Formal, Approach: The Court's reasoning advances a substantive conception of what constitutes a “direct” measure. This avoids an artificial corporate veil between investors and their assets where the investment structure involves intermediary entities.
   
   
3. Investment Treaty Drafting: The ruling demonstrates the importance of precise drafting in BITs. States and investors must be clear about the scope of protections and definitions of “Investment” and “Measure.”
   
4. Impact on State Regulatory Power: While the Court expressly limited its analysis to treaty interpretation and did not address the broader tension between investor protections and the state’s right to regulate, the ruling may narrow the space for states to argue that their regulatory acts fall outside treaty protections merely because they affect locally incorporated entities.
   
   
5. Strategic Seat Selection: The case reinforces the significance of choosing the arbitral seat. Investors may view London as a jurisdiction willing to rigorously test the boundaries of arbitral power, potentially increasing legal certainty in complex investment disputes.

6. Conclusion

RAKIA v Republic of India represents a judicial pushback against an overly formalistic approach to jurisdiction in investment arbitration. The High Court’s willingness to adopt a purposive, investor-oriented reading of BIT provisions signals a robust role for the English courts in safeguarding access to treaty arbitration. While the long-term implications for ISDS are still unfolding, the decision will no doubt be a touchstone in future investor-state disputes seated in England.