Is India trying to avoid arbitration awards?


Since the codification of international trade law, global trade disputes and their parties have resorted to international trade arbitration for their resolution. International commercial arbitration, based on the Geneva Convention and the New York Convention, has paved the way for smooth and efficient dispute resolution in sensitive international trade issues.

Not only are disputes between commercial parties resolved by arbitration, but even disputes between nation states and commercial parties are referred to arbitration for resolution.

However, the enforcement of arbitral awards depends on national laws as their enforcement is subject to the jurisdiction of a country. Apart from this, the parties to the dispute also have the freedom to challenge the validity and application of the arbitral award. The grounds for contesting the validity of the award are provided for in the national laws of the country where enforcement is sought.

Often, the freedoms available to question the validity of the sentence are misused to extend the period of execution. This buys the defaulting party to the dispute to delay payment of the award money as awarded by the arbitral tribunal.

India is one of those countries that has avoided arbitration awards for some time. Let’s discuss it in this article.

The Cairn case

The Cairn Energy arbitration dispute is one of the most hotly debated arbitration issues today. Cairn Energy is a country governed by the India-UK bilateral treaty. The Indian government imposed a retroactive tax liability on Cairn Energy PLC, which was challenged by the company in the arbitral tribunal.

The arbitral tribunal found that the Indian government had violated the provisions of the India-UK bilateral treaty, which provided for fair and equitable treatment. The arbitration award imposes a penalty and the refund of the amount of the tax to Cairn energy.

The Indian government, in an attempt to avoid the sentence, challenged the validity of the sentence. Although experts are sure of the unanimous opinion that the challenge to the arbitration award, in this case, is not sustainable, the Indian government is still moving forward, showing its evil intention.

In response to this, Cairn Energy PLC decided to cease India’s sovereign assets in several jurisdictions, including Paris, to enforce the arbitration award. This not only jeopardizes the financial security of India’s sovereign assets, but also tarnishes India’s image.

While this is the case, several experts are also of the opinion that the liquidation or privatization of India’s sovereign assets in companies like Air India, LIC and others would lead to a decrease in the assets to be repaid by the government.

The Devas case

In the much discussed Devas Multimedia Pvt. Ltd also involving the Indian Space Research Organization, the arbitration award against India was won by Devas Multimedia Pvt. Ltd., despite its subsequent liquidation by the National Company Law Tribunal.

Since the arbitration award was time-barred for payment by India to Devas and again evaded by the Indian government, Devas also took the path chosen by Cairn. Indian sovereign assets, including that of Air India, were to cease and take the funds.

However, during this time, Air India privatization talks started to gain momentum. While the privatization has given the Devas hope to get their money back, like Cairn does at present, the same has also saddened all existing or future parties in arbitration disputes with the Indian government.

The repeated tones and cries of privatization are ringing the alarm bells as it would practically leave the Indian government with little or no sovereign assets overseas and so if there was nothing to take, what would the opposing parties do to enforce the sentences?

These means of evading arbitral awards are not appreciable, especially for countries like India which occupy strong international positions.

Image source: Google Images

Sources: New Indian Express, GAR, India New Republic

Find the blogger on: @innocentlysane

This article is tagged under: arbitration, act of arbitration, cairn, cairn energy, devas, devas multimedia, air inde, paris, france, new york convention, geneva convention, act of arbitration, disputes, commercial disputes, arbitration award

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