In Republic of Korea v Mohammad Reza Dayyani and others, the English High Court dismissed a jurisdictional challenge against an arbitral award in favour of the Dayyanis – a group of Iranian investors – in a London-seated arbitration against the Republic of Korea.

In doing so, the Court endorsed the tribunal’s construction of the definition of “investment” in the bilateral investment treaty between the Republic of Iran and the Republic of Korea (the “Treaty”) and accepted that contract rights held via a subsidiary fell within the scope of that treaty.


The underlying dispute arose out of the Dayyanis’ failed attempt, in 2010, to acquire a majority stake in the financially distressed Korean conglomerate Daewoo Electronics.

The Dayyanis – via D&A, a Singaporean vehicle interposed in the transaction due to sanctions against Iran – had entered into a share purchase agreement (the “SPA”) with a group of sellers which included the Korea Asset Management Company (KAMCO) – an agency of the Korean government – and paid a deposit of around $50 million to secure the purchase of the shares.

In the arbitration, the tribunal unanimously found that Korea (via its agency, KAMCO) had breached its obligation to accord fair and equitable treatment for terminating the SPA in bad faith. A majority ordered Korea to repay the contract deposit plus interest and pay the claimants’ arbitration costs.

The set aside application

The application, made under section 67 of the Arbitration Act 1996, raised two issues of significance. The first was whether the contract rights under the SPA and the contract deposit were “investments” within the meaning of the Treaty. The second was whether these could be characterised as investments notwithstanding the fact the Dayyanis were not party to the SPA.

  • Is a contract right an investment under the Treaty?

There were two limbs to the Republic of Korea’s argument. The first was that the contract rights under the SPA and the deposit were not “property” or “assets”. Secondly, it was argued that the putative investments lacked the “objective characteristics” of an investment namely (i) a contribution to the host state’s economy (ii) investment risk and (iii) duration.

Both arguments were rejected by the Court.

The Treaty contained a wide definition of investment, protecting “every kind of property or asset” including certain specific categories listed by way of example, albeit these did not include contract rights or the close proxies that can be encountered in treaty practice (such as “claims to money” or “claims to performance”).

Butcher J accepted that “asset” embraces something which has economic value but considered this did not necessarily equate to commercial or exchange value. He found that the contract rights under the SPA did have economic value because the SPA was awarded after a contested tender process and secured an exclusive right to participate in that process as well as other vested rights. The economic value was also demonstrated by the substantial deposit paid to secure those rights. He also found that the contract rights fell within the definition of “property” as things which are “objectively definable and identifiable by third parties” and having “some degree of permanence or stability” but do not necessarily have economic value.

As regards the second limb of the argument, Butcher J found there was no basis for reading into the Treaty requirements of contribution, risk or duration which were not specified in its express wording. In particular, the Judge disagreed that the phrase “invested by” in the Treaty imported a requirement of active commitment of resources by the investor. This contrasts with the approach taken by other investment tribunals (see the awards in Standard Chartered Bank v. United Republic of Tanzania ICSID Case No. ARB/10/12 and Clorox España v Bolivia PCA Case No. No. 2015-30). In any event, Butcher J found that the contract rights satisfied these attributes because (i) D&A had undertaken various obligations under the SPA and thus could be said to have made a contribution; (ii) the SPA had significant duration; and (iii) was subject to risk, including material political risk going beyond mere contractual risk.

  • Is it still an investment if it is indirectly held?

This was answered in the affirmative.

Butcher J found the absence of any express requirement that the investor owns a direct legal interest to be a decisive indication that the Treaty parties did not intend to exclude indirect interests from its scope. This is consistent with the approach taken by the majority of investment tribunals, albeit many of the cases which have taken this approach were concerned with claims of expropriation by indirect shareholders in respect of their indirect shareholding in a local entity. This judgment goes further and confirms that the presumption that indirect assets are protected also applies in respect of contract rights.


This judgment takes a pro-investor stance on issues which have given rise to considerable debate and conflicting decisions in investment treaty arbitration.

Given the relatively standard definition of investment used in the Treaty, it is likely to have at least persuasive authority in respect of potential jurisdictional challenges that may be made on similar grounds.

Click here for a copy of the judgment.