Is Devas Ruling A Pyrrhic Win?

Source: The post is based on an article “Is Devas Ruling A Pyrrhic Win?” published in The Times of India on 31^st August 2022.

Syllabus: GS 2 – International issues

Context: The articles discuss the issues related to arbitration awards and various steps taken by the government.

What is the history associated with Devas arbitration award?

Antrix Corporation and Devas Multimedia entered into a transaction for leasing of S-Band spectrum in 2005, and which came to be cancelled by Antrix following the “2G scam”.

Devas sued and secured an award in an India seated ICC arbitration (domestic award) of over Rs 10,000 crore.

CBI initiated an investigation into the transaction and filed an FIR alleging that the transaction has been made to defraud the state of its resources.

Antrix filed a petition before the National Company Law Tribunal for winding up of Devas on grounds of fraud.

This petition was filed with the authorisation of GoI. The petition was allowed and upheld by the apex court. SC said the entire transaction was in conflict with the public policy of any country.

What steps have been taken by Delhi High Court?

Delhi HC has set aside the ICC award.

It will lead to an automatic stop on all seizure orders passed by foreign courts in pursuance of enforcement proceedings initiated by Devas.

However, Devas shareholders initiated another BIT arbitration against GoI, which is yet to be concluded.

Thus, setting aside the ICC will not be sufficient. The BIT awards were passed in separate and independent proceedings, and are not automatically void by the setting aside of the ICC award.

What lies ahead?

The seizure proceedings in enforcement of two Bilateral Investment Treaty (BIT) awards may not become void like ICC award.

A BIT is a reciprocal sovereign-to-sovereign guarantee that protects investors and investments of one country in the territory of the other.

Devas’s shareholders may allege that setting aside of the ICC award will deprive them of their rights to the money.

GoI can argue that the outcome of a judicial proceeding is not same as to state action and therefore it is not acceptable to treaty arbitration.

It will also lead to India’s image of going against treaty claims.

India’s reluctance to return to negotiation in the matter also negates the positive steps the present dispensation had taken in settling the retrospective taxation disputes with Cairn and others.