CPI(M) on India’s Treaty Ratification Process

Here is something interesting from the Communist Party of India’s (Marxist) draft political resolution that it has come out with after the loss in the Bengal elections:

The [CPI(M)] draft resolution says that approval of the parliament should be must before signing an international treaty. Currently, the Indian government can sign an international treaty under its executive powers. It was done when we signed the WTO treaty in 1995. Approval of the parliament was not taken. Subsequently the bills to amend patents and other laws were brought before parliament; and it was said that not amending the laws would be fatal because the WTO treaty had already been signed. The parliament was presented with a fait accompli and reduced to the position of subordination to the executive. It is necessary to take approval of the parliament to prevent such excesses on the part of the executive in future.

You can read an analysis of the whole resolution (which, unsurprisingly, is quite anti-globalization) in a Tehelka report by Bharat Jhunjhunwala here.

India Initiates WTO Dispute Against Turkey

According to the WTO website, “[o]n 13 February 2012, India requested consultations with Turkey under the dispute settlement system concerning the latter’s safeguard measures on import of cotton yarn (other than sewing thread).” More information, as and when available, can be found here (DS428).

It is interesting to recall that India and Turkey have had a previous dispute regarding certain quantitative restrictions imposed by Turkey on the imports of certain textile and clothing products from India (DS34). That dispute was finally decided by the Appellate Body on 22 October 1999.

India loses White Industries BIT Arbitration

UPDATE (13 February 2012): We now have access to the full text of the arbitral award: White Industries v. India Arbitral Award (Click to download; PDF ~ 5 MBs)

According to various reports (Indian Express, IAReporter), an arbitral tribunal constituted under the Australia-India bilateral investment treaty (BIT) has held India to be in breach of its obligations under the BIT and international law to an Australian mining company –White Industries. We haven’t discussed this dispute before, except in passing, however, this arbitration proceeding has been quite high profile, generating a lot of interest in the Indian news media and press (Times of India). A detailed background of the facts is available through an earlier IAReporter report. Very briefly, here are the essential details:

The treaty claim by White Industries Australia Ltd., an Australian mining company, was filed against the Government of India [in 2010 presumably] following complaints by the company that the Indian courts have failed to enforce a foreign arbitration award obtained in 2002 in a dispute between White Industries and its Indian joint-venture partner, Coal India Ltd., an Indian state-owned entity.
The Australian firm entered into a joint-venture agreement in 1989 for the development of a major coal mine in Eastern India. At the time, the mine represented the largest investment by Australia in India.
In 1999, White took its JV partner, Coal India Ltd. to arbitration under the International Chamber of Commerce (ICC) rules provided by their agreement.

[...]

[T]he Australian firm obtained a favourable arbitral award in May of 2002 and turned to the Delhi High Court in September of that year in an effort to enforce that award.
For its part, Coal India Ltd. responded by lodging its own bid before a different Indian Court, the Calcutta High Court, to have the award set aside. White Industries objected to these efforts, and filed a petition contesting that Court’s jurisdiction to entertain a set-aside request.
On May 17, 2003, a Judge of the Calcutta High Court ruled that the Court had jurisdiction over the set-aside proceedings. Following an appeal by White Industries, a panel of the same Court ruled the following year that the Indian courts could consider a setting-aside of the ICC award. The May 7, 2004 judgment did not rule on the merits of the set-aside application.
That judgment is currently on appeal before the Indian Supreme Court.

Badrinath Srinivasan, over at the Practical Academic blog, provides more details, obtained under the Right to Information Act from Coal India, on the original ICC arbitration between White Industries and Coal India.

Presumably, White Industries, tired by the delay in the Indian court proceedings (its been 7 years since the matter has been pending before the Supreme Court), decided to file a claim under the Australia-India BIT in 2010. The arbitration was held under the UNCITRAL Rules (recall that India is not a party to the ICSID Convention), with hearings taking place in September 2011 at Maxwell Chambers in Singapore. The three member tribunal hearing the claim consisted of: of Charles N. Brower (claimant’s nominee), Christopher Lau (India’s nominee), and J. William Rowley (tribunal chair). On the details of the party’s legal representation and the proceedings, IAReporter notes:

White Industries is understood to be represented by the law firm Mallesons in the treaty claim. On its website, the firm indicates that it is handling a claim under the Australia-India BIT. A Partner with the firm cited confidentiality obligations, when asked for comment. Meanwhile, Luthra, an Indian law firm, is representing White in the domestic Indian proceedings.
The Government of India is understood to have engaged the services of Toby Landau QC, a London-based barrister and arbitrator.

The Tribunal rendered its award in November 2011, merely two months after the oral hearing:

In a unanimous November 2011 arbitral award, a three-member tribunal ruled that White Industries Australia Ltd. was denied “effective means” of asserting claims and enforcing rights with respect to its investment in India. The award has not yet been published.

According to IAReporter, in reaching its conclusion, the tribunal held that a “commercial arbitration award can be an integral component of a broader foreign investment”. The result seems to be similar to the Saipem arbitration involving Bangladesh (although, in my opinion, the tribunal in Saipem did not conclusively answer the question of whether an arbitral award, in itself, constitutes an investment that can be expropriated by national courts by denying enforcement. Andrew Newcombe, over at the Kluwer Arbitration Blog, seems to agree on this). Also relevant here may be the award in GEA v. Ukraine (concerning a claim arising out of non-recognition and non-enforcement of a prior ICC award by Ukranian courts) where the tribunal held that the held that the relevant arbitral award did not constitute a protected investment under the Germany-Ukraine BIT or the ICSID Convention.

Of course, whether an ICC arbitral award constitutes an “investment” for the purposes of the BIT is an important question for, if the answer is yes, the non-enforcement and non-recognition of this award, in violation of the relevant international norms, can amount to expropriation by the state, thus providing a cause of action under the BIT. In this sense, these BIT tribunals can be seen as assessing the lawfulness of the actions of the national courts in enforcing and recognizing foreign arbitration awards. This comes close to the idea of an international court for the enforecement of arbitral awards, as proposed by, amongst others, Judges Howard Holtzmann and Stephen Schwebel. On the desirability of treaty tribunals taking up this role, a key question is obviously that of state consent for such function by the tribunals. Indeed, express state consent on this issue remains absent (hence the absence of an international court as proposed above), and it might not help the legitimacy of investment treaty arbitration if tribunals adopt such an “appellate” function over national courts in the absence of such consent. Of course, that’s quite a classical view of the problem. The transnationalists, obviously, might not see the absence of express state consent as a problem at all.

Another related issue is that of claims for the denial of justice under BITs. I shall save my thoughts on that for a later post.

As a practical matter, India’s loss can certainly help explain the recent reports indicating that India will not include investor-state arbitration clauses in its future bilateral investment agreements. On another note, the award in White industries also serves as a reminder of the need for smoothening out the creases in Indian arbitration law, a process that might already be underway as evidenced by the reconsideration of the law laid down in Bhatia International by a constitution bench of the Supreme Court of India.

P.S. Since the arbitration was held under the UNCITRAL Rules, the award has not been made public. In case it is, I will obviously post the link here.

P.P.S. A special thanks to Luke Eric Peterson of IAReporter for allowing free access to the reports on this dispute.

Old Habits Die Hard: EU Detaining Generic Drugs in Transit Again?

Readers may recall that we’ve discussed the issue of the EU customs authorities detaining generic pharmaceuticals, while in transit between developing countries, at European ports of transit. As I’ve argued elsewhere, such practice and indeed the law which it is based on, EC Reg. 1383/03, appear to be inconsistent with international law, specifically the GATT and the TRIPS Agreement.

In July last year, the Indian government indicated that it reached an ”understanding” with the EU, whereby the EU assured India that generic drugs originating in India and destined for other developing countries would not be detained while in transit through Europe. I was quite skeptical about this “understanding”, and it seems my fears were not completely unfounded. Recent reports suggest that the EU is returning back to its old ways. According to a report published on January 23, 29 cartons of drugs sent from India were detained by European customs authorities for nearly two weeks. The final destination for the consignment was “South America”. This incident reinforces my arguments on the systemic nature of the problem. Let’s see what ramifications, if any, this has, and how the situation develops further.

 

R. P. Anand, International Law and India

I would highly recommend interested readers to visit the website of the R. P. Anand Virtual Centre for International Law (VCIL), a website dedicated to Prof. R. P. Anand – a brilliant and inspiring Indian scholar who dedicated his life to a systematic study of international law from a majority world and Indian perspective. Unfortunately, Prof. Anand passed away last year.

The website of the VCIL is dedicated to the life and writings of Prof. Anand, and seeks to preserve and further his legacy. Especially useful are Prof. Anand’s writings, most of which are available on the website in electronic format for free download. My favourites include the book New States and International Law and the monograph Development of Modern International Law and India (DMILI). True to Prof. Anand’s style, these works present highly accessible alternative narratives to the traditional Eurocentric conceptions of international law. Of course, they are “radical” and “critical”, but such academic labels aside, the works are quite original, well-reasoned, interesting and, perhaps most importantly, inspiring. I would especially recommend Development of Modern International Law and India as the starting point for the study of International law by Indian students and scholars.

Talking of Prof. Anand, I must also recommend a video recently posted on the UN Audiovisual Library on International Law (which has a nice collection of lectures on interesting topics by leading international lawyers and scholars). The video records a panel discussion dedicated to Prof. Anand at a recent conference in Beijing. The panel is moderated by Judge Xue Hanqin (ICJ), and the discussants are Profs. Surya Subedi, B.S. Chimni, Tony Anghie, Sornarajah and Usha Natarajan. Apart from an overview of Prof. Anand’s  contributions and the main themes of his scholarship, which remain the main focus of the discussion, the video helps paint a rare and interesting personal portrait of  Prof. Anand — the teacher and the master story-teller — which is especially useful for those of us who did not have the opportunity to meet or work with him, and those engaged in international law pedagogy in India.

India and Foreign Investment: Recent Developments 1

Poor governance and lack of transparency obstacles to FDI in India; government decides to shun investment treaty arbitration 

In a recent report on India as a direct foreign investment destination, Ernst & Young notes that

“[t]he fundamentals that make India attractive to investors remain intact, [h]owever, our respondents continue to cite inadequate infrastructure and a lack of governance and transparency as major obstacles to investment.”

As noted in the report, this is reflected in the fact that whereas FDI into India rose by 13 percent in 2011, business confidence has declined over the past year as a result of slowing economic growth, corruption and policy paralysis. “Robust domestic demand, cost competitiveness and a cheap, ever-growing labour force” are cited as India’s major attractions for foreign investors. However, concerns about red-tapism, the sluggish pace of justice delivery, corruption and institutional inefficiencies remain as live and real as ever.

In light of this report and these facts, provisions in investment treaties and omnibus trade agreements granting a private right of action against the Indian state to foreign investors might be seen as a possible solution to the problem. This is because, by holding sovereign host states to “internationally accepted” standards of investment protection and security, these treaties and the arbitration process might inspire greater confidence, and thus could provide a way to overcome problems of accountability and transparency.

The Indian government, however, does not seem to think along these lines. A recent report in The Mint notes that the Indian Department of Industrial Promotion and Policy (DIPP) has decided to exclude investor-state arbitration clauses from the country’s future bilateral investment treaties. The report quotes a DIPP official:

“This is now the view worldwide that the state should not get drawn into private disputes,… That’s why we are cautioning to be more careful.”

From the report, it seems that the decision was inspired, in particular, by the recent chain of events involving Philip Morris Asia’s claim against Australia, in response to the plain packaging legislation for cigarettes in Australia. The PM-Australia plain-packaging arbitration is the latest poster-child for the detractors of the investment treaty arbitration system.  According to the Mint report, the concerns of the DIPP, however, do not seem to be shared by India’s finance ministry:

“With the growing clout of Indian companies investing in countries around the world, including the less stable countries in the African and South American regions, they need the protection of the local governments,” the finance ministry official said on condition of anonymity. “So, we are not in favour of reviewing this clause.”

The DIPP, however, seems to be sticking to its stance, and even plans on renegotiating India’s BIT’s with a view to excluding the ISDS provisions from them.

What could the reasons for India’s policy decision be? In light of the Ernst & Young report, the decision certainly seems incongruous. However, could this be yet another sign of the growing dissatisfaction with the present state of the international investment law landscape? It certainly provides another reason for a fresh look at the ITA system. It does seem to reflect the growing perception that the cons of ITA system have come to outweigh its pros, and that states are obviously becoming more concerned about issues of regulatory autonomy and the limitations imposed by BITs and investment arbitration.

[This post is a part of the series "India and Foreign Investment: Law and Policy", which aims at noting the latest developments in the area] 

Indian Judge at the ICJ: New Developments

According to a report by Dhanajay Mahapatra in the Times of India, Hon. Justice Dalveer Bhandari of the Indian Supreme Court is likely to be nominated by the Government of India for the position of a permanent judge at the ICJ. Readers may recall that we have discussed this issue before (here). In that post, I had said that an Indian judge could fill the vacancy arising out of the retirement of Judge Owada. It now appears that an Indian judge would fill the vacancy arising from the departure of Judge Awn Shawkat Al-Khasawneh, who left in order to take up the position of the Prime Minister of Jordan. India had supported Judge Al-Khasawneh’s in getting elected to the ICJ, and “MEA [India's Ministry of External Affairs] circles believe that India’s nominee for the judge’s post in ICJ will get support from Jordan along with friendly neighbours like Sri Lanka and Bangaldesh.”

The Times of India article offers a fascinating insight into the Indian practice relating to the nomination of jurists to the ICJ. As the article details, the selection process involved both the Government of India and Indian national group at the Permanent Court of Arbitration (PCA).  To recap, the process of appointment of judges to the ICJ is governed by Article 4 of the ICJ Statute, which provides, inter alia, that:

1. The members of the Court shall be elected by the General Assembly and by the Security Council from a list of persons nominated by the national groups in the Permanent Court of Arbitration, in accordance with the following provisions.

India’s national group in the PCA comprises of retired Judges M. H. Kania and Y. K. Sabharwal, as well as senior advocate B. Sen. It appears that in the end, the list of possible names narrowed down to P. S. Rao, an ex-legal advisor in the Indian Ministry of External Affairs and currently an arbitrator in a dispute between India and Bangladesh at the PCA, and Justice Dalveer Bhandari. P. S. Rao’s name had been proposed by the Prime Minister’s Office to the national group. Initially, two of the three members of the PCA’s India national group were in favour of the nomination of P. S. Rao, however, after two months of deliberations, the national group chose to settle on Justice Dalveer Bhandari because of his “pro-poor and pro-social equity judicial disposition“.

Needless to say, this is great news. Its been over 20 years since India had a permanent judge on the ICJ (Justice R. S. Pathak, the last Indian permanent judge, retired in 1991). Justice Dalveer Bhandari is currently the third seniormost judge at the Supreme Court and is due to retire on 30 September 2012. As Justice bhandari’s profile indicates, apart from his work at the Supreme Court, he has an LL.M. from Northwestern University, Chicago, and has attended several international law conferences and events. He is also the President of the India International Law Foundation. Personally, I’ve had the opportunity to meet Justice Bhandari a couple of times during his visits to National Law University, Jodhpur, and I’ve always been impressed by his knowledge of the international legal order and interest in international developments. 

Needless to say, these developments also offer an opportunity to reflect upon the Indian practice and procedure for nomination to the ICJ. For a critical perspective on Justice  Bhandari’s appointment, I urge you to see this comment by “C. I. Singh” on my previous post, arguing that someone with direct experience in international law and international dispute settlement, like P. S. Rao, would have been better suited for the position. Whereas the commentor seems to make a reasonable point with regards to P. S. Rao’s experience, I disagree in principle when he or she states that P.S. Rao “would have been the right candidate as he is far more qualified to go up against other ICJ judges and protect India’s interests.” This, in itself, should not be a criteria for nomination to the ICJ: the position of permanent judge at the ICJ should be above and beyond protecting national interests, and it’s not about going up “against” other ICJ judges.   

That internal debate aside, ILCurry certainly hopes that we get to see an Indian jurist at the ICJ soon!