In a stinging indictment of the slow speed with which the higher judiciary decides cases and the lackadaisical manner in which the government deals with disputes involving foreign companies doing business in India, a three-member international arbitration panel has decided a major case against the government of India and a PSU.
What makes the defeat of the government of India worrisome in a case that would otherwise have been regarded as routine is the fact it is probably the first time since the slew of arbitration cases following the ill-fated Dabhol power project that a foreign company invoked the bilateral investment treaty (BIT) between India and a foreign government to seek redressal of its grievance. It was also probably the first instance of a foreign corporate involving the Indian Republic, down from Prime Minister Manmohan Singh to the coal minister and law minister, in a corporate dispute.
The 141-page order, a copy of which is with The Indian Express, has the three arbitrators questioning the failure of the Indian government to provide the foreign firm ? White Industries of Australia ? with ?effective means of asserting claims and enforcing rights? vis-a-vis the Indian PSU ? Coal India ? as well as the failure of the Indian courts to have determined ?by now? if an earlier award in favour of White Industries was enforceable in India.
Worried about the ramifications of the award, which, experts feel, could open the floodgates for similar claims by other foreign firms by invoking BIT, the government is unable to decide if it should challenge the latest award in an Indian court, and, thereby, open itself to the charge of ignoring BIT. India has signed BITs with 137 countries and the government, sources said, is not worried that corporations of all these countries would start invoking the treaty to drag the sovereign in matters that are purely financial in nature, something that could begin if foreign firms who had got 2G licences with their Indian partners, which were cancelled by the apex court last week, start arbitration proceedings.
White Industries went into arbitration ? the second time it did so in the same case ? against Coal India, with which it had a contract for supply of equipment and development of a coal mine at Piparwar, Jharkhand. The issue of confrontation was whether White Industries was entitled to bonuses. In May 2002, an arbitration tribunal ruled in favour of the Australian firm, ordering Coal India to pay an amount of 4.85 million Australian dollars plus interest and expenses to it.
Since 2003, White Industries? attempt to enforce the award has been pending in the Supreme Court. Finally, in May last year, the company commenced arbitration proceedings under the India-Australia Bilateral Treaty.
Among other things, White Industries argued before the arbitration panel that the Indian judiciary works under the influence of the Government of India and that the latter had stalled hearing of its appeal against Coal India.
Former Supreme Court Judge BN Srikrishna had travelled to London last September as an expert witness for the government of India, where he had defended Indian courts against the charge of acting in league with the state.
However, refusing to buy the assertion by Justice Srikrishna as well as submissions made by the government lawyers, the arbitrators ? Charles N Brower, Christopher Lau and J William Rowley ? have asked India to pay White Industries the money owed to it along with 8% interest from March 24, 1998. India will also have to pay $84,000 with 8% interest from March 24, 1998 as fees and expenses of the arbitrators as well as 500,00 Australian dollars with 8% interest from March 24, 1998 to White Industries. Another sum of 86,249 Australian dollars will have to paid along with interest as witness fees.