ICC Rules on Indian Space Arbitration Case

ICC

On Monday, July 25, 2016, the International Chamber of Commerce (ICC), at The Hague, ruled on an arbitration case pertaining to two Indian space agencies, Antrix and Devas. The decision by the ICC resulted in an award of nearly $1 billion in compensation to Devas. The Indian government will appeal the arbitral award. The case involves Antrix, an Indian government space organization that provides services such as satellite launches for commercial space companies such as Devas, that specializes in satellite communications.

The ICC ruling on the Indian space arbitration case stems from Antrix’s (the Indian government) termination of its 2005 deal to provide Devas with “70 MHz of the scarce S-Band wavelength” for its commercial/multimedia uses. Antrix agreed to “lease 90 per cent of the transponders in ISROs GSAT-6 and GSAT-6A satellites. However, India’s government argues that the decision to annul the contract was based on security concerns that arose via consultations with the Cabinet Committee on Security (CCS).

The ICC declared in its verdict that the termination of the contract, which essentially stop Devas from using two satellites, was “inequitable” and “unfair.” The tribunal continued to explain that in breaking this contract, the “Indian government expropriated the investments of Devas’s foreign shareholders . . . thus making it liable to pay compensation.” Some of Devas shareholders are based in the United States. The original award to Devas was $672 million with annual interest rate of 18 percent until the balance is paid in full.

The Indian government argues that as a sovereign state, it has the right to annul commercial contracts that it believes contain “irregularities or gaps in the manner in which they were inked.” It also stands by its concerns about security as were determined by the CCS. The Department of Space contends that even if they were liable for compensation, that amount would only equal “40 percent of the value of the investment and the exact quantum has not yet been determined.”

While there seems to be evidence and precedent supporting the Indian government’s decision to break the contract, some point out that India simply lacked legal representation at the tribunal proceedings. In fact, India never sent a nomination for the three-member tribunal and rather simply petitioned the Supreme Court to begin a separate arbitration case against Devas, which failed. Additionally, Antrix failed to even show for proceedings “held to discuss draft terms of reference.”

Devas claims the relationship between themselves and Antrix has struggled from the beginning. This new decision has reaffirmed the Court’s previous decision but there will be time for India’s government to address other legal issues when Devas petitions the Court to enforce the award.

This ICC ruling on an arbitration case pertaining to India’s space programs will be monitored as the award process continues. This month the ICC revised its Practice Note, which focused on increasing scrutiny during the award process as well as reducing fees associated with the often lengthy process. This Practice Note was released just days before the ICC held its 2016 series of regional Young Arbitration Forums (YAF) in Athens.

By Joel Wickwire

Sources:

Forbes: India’s Possible $1 Billion Satellite, Spectrum Arbitration Loss and the value of ISDS Provisions

Herbert Smith Freehills Dispute Resolution: “We Will Pay for Delays” – ICC Clampdown on Its Award Scrutiny Process

The Hindu:  Antrix-Devas Deal: India to Appeal Against Hague Tribunal’s Verdict

The Hindu:  Tribunal Rules Against Indian Govt

The Hindu:  Setback at the Hague

International Chamber of Commerce:  Europe’s Young Arbitrators Convene in Athens

Image Courtesy Kordite’s Flickr Page – Creative Commons License

Your Thoughts?