17 January, 2016
In early 2015, Cairn Energy notified the Government of a claim under UK-India BIT in relation to a $1.6 billion tax demand raised by Indian tax authorities. The tax demand relates to transactions which were undertaken to effect the group reorganisation for the initial public offering of Cairn India Limited in 2007 and is being made under a 2012 law which seeks to tax transactions retrospectively (which is also the subject of a BIT dispute between Vodafone and the Government as reported here). Whilst Cairn Energy had nominated former Bulgarian minister, Stanimir A Alexandrov, as its arbitrator, the Government reportedly initially refused to arbitrate claiming that tax disputes are not within the scope of the UK-India BIT. It has now been reported that the Government has nominated a Singapore-based lawyer, J. Christopher Thomas QC, as its arbitrator. Separately Vedanta Resources Plc has also brought a claim under the UK-India BIT arising out of the same tax demand.
In another development, two UAE-based entities – Strategic Infrasol Foodstuff LLC and a Thakur Family Trust-Ace Hospitality Management DMCC JV ("Claimants") have served a notice of arbitration against India under the India-UAE Promotion and Protection of Investments Agreement ("Agreement"). The claim relates to the Claimants' investments in two real estate projects in Mumbai, India.
The Claimants argue that by using forged documents, the Shapoorji Pallonji Group (a private sector group) "expropriated" rights of a consortium in which the Claimants held an interest. The Claimants allege that by relying on or accepting forged documents, and as a result of certain other acts by state bodies against the Claimants' interests, the Indian Government breached its obligations (including as to fair and equitable treatment) under the Agreement. In addition to US$ 85 million in damages and other relief, Claimants have also sought interim relief to prevent all ongoing work on the two real estate projects in question from proceeding.
Final Model BIT unveiled
Against the background of various claims against the Government under BITs, the Government published a new draft model BIT (the "Draft BIT") in early 2015, as discussed previously here. The Government has now published the final version of the model BIT (the "Model BIT"), which will be used as a template for future BIT negotiations. The complete text of the Model BIT is available here.
The Draft BIT sought to strictly limit the protections afforded to foreign investors seemingly as a reaction to the BIT claims that India has been faced with over the last few years. Whilst the Model BIT represents an improvement over the Draft BIT, the extent to which the Model BIT provides meaningful protection to foreign investors remains questionable. Read more here.
Tribunal formed in the India-Italy dispute
The Permanent Court of Arbitration has announced that a five-person Arbitral Tribunal has been constituted under the UN Convention on the Law of the Sea, in relation to the case involving two Italian marines who have been accused of killing two Indian fishermen off the coast of India in February 2012. Arbitral proceedings were commenced by Italy on 26 June 2015, and the International Tribunal for the Law of the Sea has asked India to suspend legal proceedings in the Supreme Court of India, which had itself decided in 2013 that it had jurisdiction to hear the matter.
The arbitral tribunal will be chaired by Vladimir Golitsyn of Russia, and will also be constituted by P Chandrasekhar Rao (India), Francesco Francioni (Italy), Jin-Hyun Paik (South Korea) and Patrick Robinson (Jamaica).
For further information, please contact:
Nicholas Peacock, Partner, Herbert Smith Freehills