"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Wednesday, February 29, 2012

Sistema Sends a Notice under India-Russia Bilateral Investment Treaty to Settle Disputes Amicably

See this news item in the Hindu and this post in the International Law Curry blog providing information on the Notice sent by Sistema, a Russian Corporation alleging breach by India of the Agreement between the Government of Russian Federation and the government of the Republic of India for the Promotion and Mutual Protection of Investment dated 23.12.1994 (pdf) (India Russia BIT) and calling upon India to amicably settle the dispute between Sistema and India. Sistema's action comes after the licences of Sistema's affiliate Sistema Shyam TeleServices Ltd. (SSTL) in which Sistema owned about 56% stakes were declared illegal and quashed by a two judge Bench of the Supreme Court of India consisting of AK Ganguly & GS Singhvi, JJ. in Centre for PIL v. Union of India.

As per Article 9 of the BIT quoted below, where there is a dispute between an an Investor and a Contracting Party (in this case, India ) in relation to investments made in India concerning obligations under the BIT, the same is to resolved to the extent possible by amicable settlement and, if both parties agree, through conciliation under the UNCITRAL Conciliation Rules.In case such dispute cannot be amicably settled within six months from the date of dispute, the same shall be referred to arbitration under the UNCITRAL Arbitration Rules, 1976. Note that by virtue of Article 1(2) of the UNCITRAL Arbitration Rules, 2010, where an arbitration agreement is concluded prior to 15 August 2010, the 1976 version of the Rules would upply unless parties agree otherwise. Since Article 9 of the BIT does not refer to the UNCITRAL Arbitration Rules "currently in force", the 1976 Rules would apply. Relevant portions of Article 9 read:
"1. Disputes between an Investor of either Contracting Party and the other Contracting Party arising in relation to investments made in the territory of the State of the latter, concerning obligations under this Agreement, shall as far as possible be settled amicably including resort to, upon mutual agreement of the parties to the dispute, conciliation procedures under the Conciliation Rules of the United Nations Commission on International Trade Law (UNCITRAL).
2. If a dispute cannot be settled in such a manner within six months from the date either party to the dispute requested In writing amicable settlement, unless otherwise agreed to by both partie, the investor concerned may submit the dispute to an ad-hoc International arbitration tribunal set up in accordance with the Arbitration Rules of UNCITRAL
This seems to be a season for investment arbitration against India. See the previous posts in this blog on the White Industries investment arbitration against India. Sistem'a Press Release on the Notice can be accessed from this link. Considering the White Industries Investment arbitration and Sistema's recent action of invoking the dispute resolution provisions of the India Russia BIT, the Government of India might go ahead with its proposed action not to agree to arbitration clauses between Investor and the Government of India. Livemint in this news report states:
"As reported by Mint on 29 January, India is likely to exclude in bilateral trade pacts the clause that permits a foreign investor to sue the host country at an international dispute settlement agency. The department of industrial policy and promotion has, in principle, decided not to include such a condition. India had declined to include such a clause, also known as the investor-to-state dispute settlement mechanism, in negotiations over a trade pact with the European Union, Mint reported on 4 July. These negotiations are continuing."

We will follow this investment arbitration closely.

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