The claim was made under the Arbitration Rules of the United Nations Commission on International Trade Law and the investment agreement between the Republic of Mauritius and Indian government. Bechtel and GE, which have an equity worth $120 million each in DPC, have already submitted their arbitrators name to GoI on September 5, thus beginning the 60-day panel selection process.
A joint press release issued by Bechtel and GE said that under the India-Mauritius Bilateral Investment Treaty, each party appoints one arbitrator within two months of this filing, and a third arbitrator is appointed by the two selected arbitrators. The arbitration is expected to commence after all arbitrators are chosen and the decision of the panel is binding.
We have attempted to resolve our legal and contractual claims but have been blocked at every turn. Regrettably, this international arbitration demand must be made, said Rick Smith, executive vice-president and managing director of Bechtel Enterprises.
GE and Bechtels move assumes importance, especially when an independent arbitral in the US has recently ordered the political-risk insurance claims held by the Overseas Private Investment Corporation to be paid in the amount of $28.5 million for each company. The ruling is expected to trigger a US government claim for compensation against the Indian government.
GE and Bechtel have resorted to the arbitration following attempts by both state and national officials to deny DPCs rights relating to the power project. According to these companies, the state and central governments had denied the ability to operate Dabhol phase-I, complete construction of phase-II, reimburse contractors, service debt and pay dividends to the project sponsors. The Maharashtra State Electricity Board (MSEB) refused to make payments under the power purchase agreement (PPA), improperly rescinded the PPA and ceased to buy power from DPC. These actions effectively destroyed the primary assets of DPC and represents an improper taking of the plant itself.
Moreover, actions by Indian financial institutions to seize control of DPC assets deprived GE and Bechtel of their investments. Finally, the Maharashtra Electricity Regulatory Commission (MERC), an agency created after the PPA was signed, blocked GE and Bechtels ability to pursue the international arbitration provisions in the PPA which prevented DPC from pursuing arbitration against MSEB and the state and Central governments.
According to GE India president Scott Bayman, We will continue to pursue full recovery of these investments through all available means. At the same time, we remain committed to helping to restart this much-needed power generation facility. It is incumbent upon all responsible parties to make sure this happens in a fair and reasonable way.