The development comes amidst a barrage of accusations and counter-accusations by the two sides over the events leading to the termination of the project. While the Bolivian authorities have maintained that the Jindals illegally fled the country and transferred funds out of Bolivia to the Cayman Islands, JSPL denies all this. Meanwhile, the Bolivian government has sought Interpol's help to track the JSPL executives who left the country.
In an exclusive interview with FE, the first to any media ever since the controversy broke out, Vikrant Gujral, vice-chairman and head (global ventures), JSPL, said that even as they would pursue arbitration, they were willing to settle the issue amicably with the Bolivian government. We have conveyed this message to the Indian ambassador in Peru, who is accredited to Bolivia as well, Gujral said.
He categorically denied all charges levelled by the Bolivian authorities that he and his team unlawfully fled the country by reneging on their contractual commitments to the project. We left the country on the advice of our ministry of external affairs officials when we learnt that the Bolivian authorities had wrongfully filed criminal cases against us and were planning to arrest us. Subsequently, we have written to them that we are willing to meet them to sort out the problems in any neutral place and offered Chile, Spain and Brazil as possible locations, Gujral said.
On Bolivia resorting to Interpol to track them, he said that they were in the process of understanding from the Indian authorities of how to tackle it.
Gujral said that the Bolivian government had never fulfilled their part of the commitment for the project but still the company invested around $100 million in the project and started work in good faith. But when the Bolivian authorities failed to provide the agreed quantity of gas, and were not willing to reconfigure the milestones according to lower supplies, and illegally encashed the bank guarantee a day after it had become invalid, the company had no choice but to terminate the project.
The termination was done lawfully by adhering to the stipulated notice period in the contract. On March 8, 2012, we served a notice on them to fulfil the conditions of the contract within 30 days or we would cancel the project. Subsequently, on June 8 we sent a letter of intent for terminating the project and after giving a time of 37 days, on July 16 terminated the contract, Gujral said. Even now we are adhering to the terms of the contract because it mandates us to file for international arbitration only 90 days after the contract has been terminated, he added.
The $2.1-billion project to be completed in two phases in eight years never had a good start, according to Gujral. The contract required JSPL to make an investment of $600 million in the first two years and the company had opened a bank guarantee of $18 million. The Bolivian government was supposed to provide for the iron ore mines, 5,200 hectares of land and 6 million cubic metres (MCM) gas per day during the first phase of the project and 10 MCM per day during the second phase. Though the company was given the iron ore mines, land was allocated late and till date 250 hectares have not been given.
Gujral said that the first problem arose in February 2010 when the Bolivians encashed their bank guarantee of $18 million on the pretext that the company had not started work, which was wrong. When we protested, they said the contract provided for arbitration. We lodged the claim at ICC, Paris, in 2011. They appointed an arbitrator but he was not neutral but linked to the Bolivian government. They were asked to appoint a new arbitrator by ICC recently, Gujral said.
The ICC or International Chamber of Commerce is the parent body of the International Court of Arbitration.
He said despite such an experience the company carried on with the project and opened another bank guarantee of $18 million and started work by placing orders for equipment worth $600 million. The matter got stuck when the Bolivian authorities did not provide gas linkage to the project. The fuel was crucial to the project because Bolivia does not have coal and even its import and burning in the country is not allowed. According to Gujral the problem with the Bolivians was that when they signed the contract it was on the basis of gas reserves of 27 trillion cubic feet (TCF). Later, when an independent US firm was hired for studying the reserves, it turned down to be much lower at 9 TCF. The Bolivians were trapped. They had signed gas supply contracts with Brazil and Argentina on pay and take basis. For fresh exploration another it would have taken five to six years. They could not tell us of the problem because their Constitution states that gas should first be provided for domestic projects but by exporting they were earning money, which they did not want to lose. They wanted to reduce our supplies from 6 MCM per day to 2.5 MCM. We said in that case reconfigure other benchmarks in the contract, which they were not agreeing to. In was in this context that we decided to serve them a legal notice leading to termination of the project, Gujral said.
He said that the company's investment worth $100 million is stuck in the country along with other physical assets. Gujral also rebutted charges like the company not having money for the project or transferring funds to the Cayman Islands. He said that JSPL exported some 22,000 tonnes of iron ore from the mines since September 2011 and around 70% of the earnings from this also went to the Bolivian authorities as part of taxes and royalty.