Australian judge agrees to being arbitrator on Reliance Indutry dispute

Written by PTI | New Delhi | Updated: Jul 9 2014, 00:13am hrs
Reliance IndustriesMcHugh said that given his availability constraint and the fact that the Supreme Court wanted the process to be expedited.(Reuters)
Supreme Court-appointed arbitrator in Reliance Industries' KG-D6 dispute with the government had refused to take up the assignment due to preoccupations but later relented and accepted being the neutral umpire.

The apex court had on April 29 named Michael Hudson McHugh, former judge of the High Court of Australia, as the third arbitrator in the dispute over cost recovery in KG-D6 gas block.

Sources said McHugh however refused to become the chairman of the tribunal to which RIL had named former Chief Justice of Supreme Court S P Bharucha as its arbitrator and government appointed former Chief Justice of the apex court and V N Khare its counsel, saying he was not contacted before the appointment was made.

In emails to Indian authorities, he said he learnt of the appointment when the editor of an Arbitration Journal contacted him for his photograph and went on to state that because of his previous preoccupations, it would be difficult for him to proceed to India before September 15.

McHugh said that given his availability constraint and the fact that the Supreme Court wanted the process to be expedited, he would not be able to act as the Chairman of the tribunal.

He however had a change of heart after Thomas K Sprange, speaking on behalf of the partners in KG-D6 block, wrote to him saying the parties had "always envisaged that this arbitration would be long term and would take some time given the issues".

Sources said following this McHugh consented to act as Chairman of the Tribunal in accordance with the order of the Supreme Court.

McHugh did not respond to email requests for comments.

RIL and its partners BP plc of UK and Canada's Niko Resources gave consent to McHugh presiding over the arbitration tribunal but the government is yet to give its written consent, because of which the arbitration proceedings haven't yet started, they said.

In November 2011, RIL had started arbitration proceedings against the government, seeking a decision on its entitlement to recover investments made in the KG-D6 gas field from sales.

The government had disallowed as much as USD 1.005 billion of its investment as KG-D6 output lagged targets. Production from main fields in the block was way short of 80 million standard cubic meters per day target.

RIL and its partners say they are entitled to recover all costs of the block in the Bay of Bengal under their production-sharing contract with the government.

However, the arbitration couldn't start as the government refused to play ball and it was only after two-and-a-half years that the third arbitrator was appointed by the Supreme Court.