INVESTMENT DISPUTES SETTLED THROUGH THE INTERVENTION OF INVESTMENT ARBITRATION IN INDIA

                                                                                                                         – Suman V.

The first Investment Arbitration against India was the Bechtel v. India case in 2003. The ICC Arbitration is one of a large number which have been mounted in relation to the collapse of the Dabhol Power Corporation (DPC). Along with General Electric and Enron, Bechtel had partnered to develop what was to be “the largest privately owned independent power project in the world”, according to the ICC Tribunal. The DPC was to build two power plants which would supply electricity, under the terms of an exclusive Power Purchase Agreement (PPA), to a state electricity board set up in the Indian province of Maharashtra. Although the project was supported at the outset by the then-governing Indian Congress Party, it fell on harder times following the election of parties. During the late 1990s, the project ground to a stop, but was revived following a renegotiation of the underlying agreements[i]. Ultimately, ended them altogether in early 2001 and found it unable to meet its payments to the Dabhol Power Company for the electricity it was required to take under the Power Purchase Agreement, for which Arbitration notice was sent. Enron formally left the project in 2002, transferring its full interest in the project to United States Overseas Private Investment Corporation after entering into bankruptcy due to its operations being stopped which was then about 95 percent complete[ii]. The interests of the private equity investors as a result of subrogation had passed into the hands of the United States government for reimbursement as provided by the investment Incentive Agreement between the government of the United States of America and the government of India governing the operation of the OPIC program of political risk insurance in India. When those talks failed, United States instituted Arbitration proceedings against India in November, 2004. Ultimately, the two countries negotiated a settlement in March, 2005. In few months, the Indian government had settled the remaining claims of Bechtel and GE[iii].

In Offshore Power v. India (2004), Arbitration under the India- Netherlands BIT (1995), where the claims arising out of respondent’s alleged failure to protect claimant’s investment had resulted in significant loss to the claimant’s financing of the failed project were settled[iv]. However detailed information to the settlement is not available.

In 2004, 7 European Banks moved BIT Arbitration against India in the Dabhol dispute. They had signaled to proceed with International Investment Treaty Arbitrations against the government of India, in relation to alleged losses arising out of their financing to the failed Dabhol power plant project[v]. The seven banks are Credit Suisse First Boston, Standard Chartered Bank, Erste Bank Der Oesterreichischen Sparkassen AG, Credit Lyonnais SA, (now Calyon SA), BNP Paribas, ANZEF Ltd. and ABN Amro. They hail from five different European nations. Although, notices of intent to arbitrate were filed in November, 2003, the banks had refrained from filing formal requests for Arbitration while negotiations were pursued. These banks had argued that the Indian government failed to comply with its International obligations under the treaties between those countries and India[vi].

 

* The scope of this article is limited only to Arbitration proceedings in which India has been a respondent to between 2003 and 2019.

[i] International Institute for Sustainable Development, Investment Law and Policy News Bulletin (2005), https://www.iisd.org/itn/wp-content/uploads/2010/10/investment_investsd_may5_2005.pdf (last visited Apr 22, 2020)

[ii] Jeswald W Salacuse, The three laws of International investment (Oxford Univ. Pr. 1) (2013)

[iii] Id.

[iv] Offshore Power v. India | Investment Dispute Settlement Navigator | UNCTAD Investment Policy Hub Investmentpolicy.unctad.org, https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/139/offshore-power-v-india (last visited Apr 23, 2020)

[v] International Institute for Sustainable Development (, Investment Law and Policy Weekly News Bulletin (2004), https://www.iisd.org/pdf/2004/investment_investsd_dec17_2004.pdf (last visited Apr 22, 2020)

[vi] Offshore banks launch Arbitration for recovery of claims in Dabhol The Financial Express, https://www.financialexpress.com/archive/offshorebankslaunchArbitrationforrecoveryofclaimsindabhol/122438/ (last visited Apr 22, 2020)