Cross-border M&A transactions are traditionally described as having two ends: the investor’s home jurisdiction and the target market. Recent transaction filings reveal that a substantial proportion of inbound growth, joint venture, and buyout deals are actually three-legged.
Sitting between the primary sponsor and the operational asset is a holding and structuring jurisdiction, such as the Dubai International Financial Centre (DIFC), the Netherlands, Singapore, or Mauritius. The laws of this jurisdiction govern the principal transaction documents. These are prepared by local counsel whom neither party treats as primary corridor advisers.
Inox Clean Energy’s joint venture with the SkyPower group illustrates this architecture clearly. The Indian party partnered with a counterparty holding through a Southeast Asian vehicle, with the principal transaction documentation, the share purchase and shareholders’ agreements governed by DIFC law and executed by UAE firm Khaled Al-Marri & Partners. The underlying operational assets were solar projects in the Democratic Republic of Congo, Zambia, and Zimbabwe, totaling 2.5 GW, with 570 MW in the initial phase.
Similar multi-jurisdictional configurations appear across the deal tables: Morgan Stanley executing an exit from an Indian investment through a Dutch vehicle, or a Danish industrial group acquiring an Indian precision manufacturer held via a Singapore parent.
This third leg represents a mandate that is rarely marketed or contested during initial law firm pitching. Yet it is the single element of the deal structure with the longest operational tail.
What the Third Leg Determines
Measured in billable hours, the local work in the holding jurisdiction often appears minor compared to the main commercial transaction. Measured by what it determines, it is frequently the most consequential layer of the deal.
The target-jurisdiction mandate is about reaching completion: managing due diligence, securing regulatory approvals, and executing closing conditions. Once satisfied, those obligations are discharged. The third jurisdiction, by contrast, produces the instruments that govern the ongoing life of the investment. These would be the shareholders’ agreement that dictates deadlock mechanics in year four, the forum that hears commercial disputes, and the framework that determines whether the capital carries treaty protection against sovereign risk.
The India–UAE Bilateral Investment Treaty (BIT), which entered into force on 31 August 2024, makes this dynamic concrete. Having terminated most of its legacy bilateral investment treaties after 2016, India’s modern treaties impose strict conditionalities. The 2024 UAE BIT explicitly requires an investor to demonstrate “substantial business activity” in the home state, denying treaty protection to passive holding companies or shell SPVs. Furthermore, it conditions investor-state arbitration on the prior exhaustion of local judicial remedies for three years.
These treaty constraints are direct consequences of a structuring choice. Neither issue is addressed during due diligence on the operational target, and neither is reviewed in the ordinary course by local counsel instructed merely to draft governing-law documents after the structure is already fixed.
Governing Law, Arbitral Seats, and the Enforcement Inversion
A critical vulnerability in three-legged structures arises when parties treat contract governing law, dispute forums, and enforcement pathways as interchangeable. A contract governed by DIFC law, for instance, does not dictate a UAE arbitral seat; parties can select an arbitral seat in London or Singapore, where foreign award enforcement in India follows established statutory routes. And they frequently do.
Where a transaction structure does prompt the selection of a UAE arbitral seat, it triggers a counterintuitive enforcement asymmetry in Indian domestic law:
- Civil Court Judgments: The Government of India formally declared the UAE a reciprocating territory under Section 44A of the Code of Civil Procedure (CPC) in January 2020. As a consequence a money judgment issued by the DIFC Courts is directly executable in Indian civil courts without re-litigating the merits.
- Arbitral Awards: India has not issued a corresponding Gazette notification for the UAE under Section 44(b) of the Arbitration and Conciliation Act 1996 for foreign arbitral awards under the New York Convention.
This produces a direct inversion of standard cross-border assumptions: a judgment of the DIFC Courts may currently be more straightforwardly enforceable in India than a UAE-seated arbitral award.
To be sure, this Section 44 requirement is actively criticised by disputes practitioners as inconsistent with India’s New York Convention obligations and the 1999 India–UAE bilateral judicial cooperation treaty, and alternative enforcement pathways outside Part II are frequently argued. However, the fact that selecting a UAE seat introduces this layer of procedural friction demonstrates how a downstream structuring choice can complicate dispute enforcement if left unreviewed at the outset.
Upstream Selection and Strategic Positioning
The defining characteristic of the third leg is that it is usually selected before legal counsel is instructed. Holding vehicles are routinely proposed by tax advisers or internal finance teams based on tax efficiency, dividend repatriation, and administrative ease.
These are legitimate considerations. However, the law firm in the holding jurisdiction is subsequently instructed to paper a settled structure rather than evaluate its legal or enforcement consequences. The result is an architecture chosen on tax grounds, implemented by local lawyers who were not asked to audit treaty protections or enforcement pathways, and left unreviewed for long-term legal risk.
This dynamic creates distinct strategic positioning opportunities across the market:
- Firms in Holding Jurisdictions: Local counsel in the DIFC, Singapore, or the Netherlands hold exclusive authority on local governing law, but are constrained by late, narrow instructions. The available move is to push upstream: offering clients a targeted legal audit of treaty eligibility, dispute forums, and enforcement routes before the corporate structure is locked in.
- Global Firms with Multi-Office Networks: Firms operating across London, Singapore, the Middle East, and Europe possess the required multi-jurisdictional capability in-house. Unifying these practice groups around a joint “corridor design” pitch converts existing geographical footprint into a competitive advantage.
- Target-Country Lead Counsel: Indian firms handling primary commercial execution are closest to the client early in the deal. While they cannot opine on foreign holding-company laws, identifying and flagging potential treaty or enforcement friction upstream consolidates their position as the lead commercial advisor coordinating the entire transaction umbrella.
Analytical Limits
Two concessions are necessary when evaluating this dataset. First, public deal announcements report transaction execution rather than upstream decision-making; in sophisticated private equity buyouts, tax and legal structures are frequently evaluated in tandem by integrated deal teams. Second, whether a specific holding company satisfies “substantial business activity” tests or faces enforcement hurdles remains a fact-specific question for specialised counsel in that jurisdiction.
The argument is not that third-jurisdiction structures are inherently flawed, but that tax-driven holdco choices carry downstream legal consequences that should be actively audited rather than assumed.
Operational Questions that Follow
As cross-border deals become increasingly unbundled, leadership on both sides of the corridor should evaluate how third-jurisdiction risks are identified and managed:
For General Counsel and Investment Committees, the central question is whether the choice of holding jurisdiction was audited for legal risk, including treaty protection, dispute enforcement, and exit mechanics. This should be as a distinct exercise from the primary tax analysis, and whether that review occurred before or after the structure was finalised.
For law firms, the operational imperative is determining whether your practice groups are organized to capture this upstream advisory work, or if your firm is merely executing pre-settled structures while tax advisers and local boutiques capture the premium side of the deal.
Lawfinity Solutions advises international law firms on cross-border legal market positioning. If the India corridor is a live question for your firm, we would be interested in a conversation. Lawfinity works with one firm per jurisdiction. Engagements begin with a single conversation about your firm’s current position and where the corridor question is live for you. Write to Prachi Shrivastava
