Space Wars: Devas wins arbitration case, India mulls legal recourse

Chennai/Thiruvanthapuram, July 26 (IANS) India has lost its arbitration case in an international tribunal against Bengaluru-based Devas Multimedia Private Ltd for cancelling its space/satellite contract with the government-owned Antrix Corporation, Devas said on Tuesday. The government said that the order is being examined and “legal recourse will be taken”.

In a statement, Devas said: “A Permanent Court of Arbitration tribunal has found that the government of India’s actions in annulling a contract between Devas and Antrix Corporation Ltd., and denying Devas commercial use of S-band spectrum, constituted an expropriation.”

The ruling on Monday was the second by an international tribunal arising out of the cancellation of the contract between Devas and Antrix, the commercial arm of Indian space agency Indian Space Research Organisation (ISRO), the statement added.

The Hague-based tribunal, which regularly takes cases involving states, including investment treaty claims brought under arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), also found that India breached its treaty commitments to accord fair and equitable treatment to Devas’s foreign investors.

According to Devas, the unanimous decision included the arbitrator appointed by India.

Reacting to the development, G.Madhavan Nair, who was ISRO Chairman when the deal was signed, told reporters in Thiruvananthapuram that all this happened because of the UPA-2 government.

S. Rakesh, Chairman-cum-Managing Director of Antrix Corporation Limited, was not available for comments.

However, the Department of Space, in a statement, said that in the award, issued on “jurisdiction and merits on July 25, 2016”, the tribunal has said that the Indian government’s essential security interest provisions “do apply in this case to an extent” and the “limited liability of compensation shall be limited to 40 per cent of the value of the investment” but the precise quantum has not been determined as yet.

“The Tribunal has dismissed the claims as regards violation of other provisions of the Treaty viz., (i) unreasonable or discriminatory measures; as also (ii) Most Favoured Nation treatment,” it said, adding that the “award is being examined and legal recourse will be taken”.

“We also remain committed to pursue our larger national interests including sovereign strategic security interests in this matter,” the statement said.

In an earlier decision, an International Chamber of Commerce (ICC) tribunal in 2015 found unanimously that Antrix’s repudiation of the contract was unlawful, and awarded Devas damages and pre-award interest of approximately $672 million, plus post-award annual interest accruing at 18 per cent until the award is paid in full.

According to Devas Chairman Lawrence Babbio, with the PCA award, two international tribunals have now unanimously agreed that financial compensation should be paid after annulment of Devas’s rights.

“Other courts in France and the United Kingdom have agreed that the award against Antrix ought to be enforced. We prefer a mutually agreeable resolution of this matter. But until that occurs, Devas and its investors will continue to press their claims before international tribunals and in courts around the world,” Babbio was quoted as saying in the statement.

The PCA tribunal unanimously found that by annulling the contract in 2011 and denying the commercial use of S-band spectrum, the Indian government expropriated the investments of Devas’s foreign shareholders and also acted unfairly and inequitably, thus making it liable to pay financial compensation.

Antrix entered into an agreement with Devas in 2005 for the long-term lease of two ISRO satellites operating in the S-band.

However, the then United Progressive Alliance government cancelled the controversial contract in February 2011, invoking sovereignty and decided to use the advanced satellite for the country’s strategic use.

Under the annulled deal, Antrix was to lease satellite transponders to Devas for allowing it to offer digital multimedia services using the S-band wavelength (spectrum), reserved for strategic purpose.

The space agency launched the GSAT-6 on August 27, 2015 from its spaceport at Sriharikota in Andhra Pradesh, about 90 km north of Chennai, as a communication satellite, using a heavy rocket.

In June this year, the Enforcement Directorate (ED) had issued a notice to Devas for alleged violation of foreign exchange laws involving around Rs 1,200 crore.

According to a government statement, Devas Multimedia is suspected to have received FDI of Rs 578.54 crore between May 2006 and June 2010 from various overseas investors, but the share subscription agreements it entered with them contained clauses contrary to the conditions specified in the approvals granted by Foreign Investment Promotion Board.

Devas Multimedia was also charged with contravening the FDI regulations under FEMA for assuring foreign investors an annual eight per cent priority dividend in addition to other dividends on cumulative basis, and for one tranche of receipt of funds, issuing a security akin to an External Commercial Borrowing (ECB) promising higher returns than the ceiling fixed by the Reserve Bank of India.

According to the probe agency, a show cause notice has been issued to the Indian investors, the persons responsible in the Indian company, including its directors and foreign investors.

The ED has initiated adjudication process, and in case the alleged contravention is proved, the noticees are liable for penalty under FEMA, which may be up to thrice the sum involved in such contravention.

Meanwhile the Department of Space said the Central Bureau of Investigation (CBI) have filed an FIR against Devas and other unknown public servants of Antrix/ISRO/DOS and it is presently under investigation.



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