The stop order under the Foreign Exchange Act against TCI’s stake increase (2008)

Between openness and protection

At the heart of this case was a collision inside one company between the position of a listed firm subject to market discipline and the position of an operator of electricity, a social foundation. Privatisation was a choice to remove the state’s backing and encourage self-directed management, but a capital structure open to foreign shareholders also invited pressure for higher dividends and thoroughgoing capital efficiency. That pressure the government pushed back with regulation, under the Foreign Exchange Act. It can be seen as a twisted scene in which the consequence of opening the market was re-controlled by institutional means, by the very state that had led the opening.

As the first instance in which the Act’s inward direct investment controls were invoked against a foreign investor, this judgement took a place in institutional history. Thereafter screening of inward investment involving critical infrastructure and technology was applied more strictly, feeding into a body of rules built around economic security. Yet how much may be closed to foreign capital in the name of “public order” remains in constant tension with a policy of attracting capital broadly. The line between an open market and a foundation that must be protected continues to be asked about, even after this episode.