An Update on Investment Treaty Arbitrations Against India

Over the past year or so India has been involved in a number of disputes with foreign investors which are at various stages of settlement. Discussions to reach a settlement are apparently underway in the dispute initiated by Vodafone against the retrospective capital gains tax sought to be imposed by the government, although the FT notes that a settlement is “highly unlikely until after India’s forthcoming national election in 2014, if at all.”

Negotiations have failed to yield result in at least two other disputes, leading to the initiation of arbitration under some investment treaties. An arbitral tribunal has been set up in a dispute initiated by “Devas Multimedia and its U.S. associates (who invested in the deal through foreign direct investment routed via Mauritius) against the Government of India following the cancellation of the deal for the launch of two satellites and the allocation of S-band spectrum to Devas.” The arbitration has been commenced under the India-Mauritius BIT and will be held under the UNCITRAL Rules with the Permanent Court of Arbitration in The Hague acting as the registry. The tribunal comprises of Canadian lawyer and politician Marc Lalonde QC (presiding arbitrator), Chilean lawyer and currently a Judge ad hoc at the ICJ Francisco Orrego Vicuña, and the former Chief Justice of Rajasthan High Court Justice Anil Dev Singh. The investor-claimants are being represented by lawyers from Skadden, Arps, Slate, Meagher and Flom, LLP. India is instructing lawyers from the Indian law firm Khaitan & Co. and Curtis, Mallet-Prevost, Colt and Mosle, LL.P.

Reports also suggest that an arbitral tribunal has been constituted in a dispute initiated by ByCell, a telecommunications firm incorporated in Switzerland and owned by a Cypriot company and Russian nationals, under India’s BITs with Cyprus and Russia. The Lex Arbitri blog offers some information on the events leading to the dispute. According to the Economic Times, India has appointed Professor Brigitte Stern as its party appointed arbitrator. Details about the other arbitrators are not yet public. Curtis will also represent India in this proceeding.

On the appointment of Prof. Stern, the Indian government is apparently of the view that ”[a] strong arbitrator will ensure that government’s case is represented effectively”. While this view stresses the importance of party appointed arbitrators, I think the Economic Times goes a bit far in claiming that India has “rope[d]” in “Brigitte Stern to take on Swiss telco ByCell”.  The institution of party appointed arbitrators is a common feature of international adjudication. Parties regularly choose their arbitrators in international proceedings and even the ICJ allows States to appoint ad hoc Judges for disputes in which a State party does not have a Judge of its nationality on the Court. In a diverse international legal order, party appointment can serve a useful purpose as it allows the parties to choose a person who, in their opinion, can best understand their concerns, position and culture, and can effectively explain these to his or her fellow adjudicators. India’s reason to appoint Prof. Stern appears to be reasonable in so far as it is based on India’s belief that Prof. Stern is best placed to understand the concerns of developing host-States as respondents in investment arbitration. But, now that Prof. Stern has been appointed, she also has certain obligations of independence and impartiality as a judicial member of the tribunal. To say that she has been appointed by India to “take on” ByCell presents an inaccurate picture of the role and function of an arbitrator in a proceeding of this nature. India’s lawyers will be “taking on” ByCell, not the arbitrator appointed by India.

On a related note, the issue of India’s BITs recently came up for discussion in the Indian parliament. A Member of Parliament inquired how many BITs India had concluded. In response, the Minister of State for Commerce stated that India has concluded BITs with 82 States, of which 72 BITs have come into force. He also stated that India has paid Aus $ 98,12,077 to White Industries following the award against India. Interestingly, the Minister noted that, in light of its loss in the White Industries arbitration, India is now reviewing the text of its model BIT.

Hat tip to Aditya Singh for sharing the Economic Times article on the ByCell arbitration.

India seeks clarification in Kishenganga

According to this report, India has sought a “clarification or interpretation”of the Partial Award of February 18 in the Indus Waters Kishenganga Arbitration (Pakistan v. India). India reportedly has sought clarification over the prospective, binding nature of the Court of Arbitration’s ruling in the “Second Dispute” relating to the use of a technique of sediment management called “drawdown flushing”. To recall, in the Partial Award, the Court of Arbitration had held that India was prohibited from using drawdown flushing at the Kishenganga project or any future run-of-river plant on the Western Rivers, which are allocated to Pakistan under the Indus Waters Treaty. India presumably wants a clarification of the second part of the ruling, i.e., whether India is prohibited from using drawdown flushing at any future run-of-river plant on the Western Rivers. This raises very interesting issues relating to the tribunal’s jurisdiction and judicial remedies under international law generally. I hope to discuss some of these issues in future posts, but for now if you’re interested in learning more about the Partial Award, you can read my recently published ASIL Insight on the topic.

India Wins the 2013 Jessup World Championship!

This is news just coming in…. India, represented by the National Law School of India University, Bangalore, has won the world championship round of the 2013 Philip C. Jessup International Law Moot Court Competition. In the final round held today in Washington, D.C., NLS argued against Singapore Management University before a bench of distinguished judges from the International Court of Justice. This is only the second time India has won the Jessup Moot. NLS had earlier won the Moot in 1999, as well.

Members of this year’s championship winning team are: Mr. Raag Yadava, Ms. Geetha Hariharan, Ms. Shreya Jain and Ms. Akshaya Ramadurai. Congratulations to them! Congratulations are also in order for Raag for winning the Best Speaker award in the final round!

Having served as the team adviser, I have witnessed their hard-work and zeal over the past seven months and can only confirm that the victory is very well deserved and is a fitting reward for all their dedication and commitment. Congratulations, Raag, Geetha, Shreya and Akshaya! Hopefully, your personal achievement will also serve as a fillip for the professional project of international law in Indian law schools. For now, celebrate (and sleep) well!

New Issue: Trade, Law and Development

The latest issue of Trade, Law and Development, a journal published by the students of National Law University, Jodhpur (India), has just been published. Contents include:

Articles

Human Rights and International Economic Law	ABSTRACT PDF
- Ernst-Ulrich Petersmann	283-314

Investment Treaty Breach as Internationally Proscribed Conduct: Shifting Scope, Evolving Objectives, Recalibrated Remedies?	ABSTRACT PDF
- Mavluda Sattorova	315-352

Doha Round Negotiations: Problems, Potential Outcomes and Possible Implications	ABSTRACT PDF
- Surendra Bhandari	353-384

Notes and Comments

Challenges in Intellectual Property Governance: Providing the Right Incentives in the Quest for Global Innovation	ABSTRACT PDF
- Daniel Gervais	385-399

A Note on the Appellate Body Report in the Chinese Minerals Export Restrictions Case	ABSTRACT PDF
- Mitsuo Matsushita	400-420

A Balancing Act: Using WTO Dispute Settlement to Resolve Regional Trade Agreement Disputes	ABSTRACT PDF
- Felicity Hammond	421-450

Book Review

A Review of Sonia E. Rolland, Development at the World Trade Organization (Oxford Univ. Press 2012)	PDF
- Nicolas Lamp	451-471

As a consulting editor for TL&D, I would like to congratulate the Editors for putting together another wonderful Issue!

Indian Supreme Court on Jurisdiction over the Italian Marines

Although the dispute between India and Italy seems to have been abated for now, a closer look at the Supreme Court’s judgment of 18 January 2013 finding that India had jurisdiction to prosecute the marines is important. Chief Justice Kabir and Justice Chelameswar delivered separate but concurring opinions.  In its judgment, the Court found that India had jurisdiction over the Italian marines. Specifically, the Court – reasoning through a curious blend of international and domestic law – quashed the proceedings before the Kerala High Court, directing the federal Government to set up a special court to try the marines. Interestingly, however, the Court refused to answer whether the marines enjoyed  immunity by virtue of their status as members of the Italian armed forces (presumably leaving it for the trial court to decide the issue).

Readers would remember that the Kerala High Court had earlier dismissed Italy’s arguments on the extra-territorial application of the Indian Penal Code (IPC) and the Suppression of Unlawful Activities Act, and sovereign immunity of the two marines before Indian courts. The same contentions were raised before the Supreme Court (Italy’s arguments are summarized from paragraphs 13-46; India’s from 47-71; and, the state of Kerala’s from 72-81).

The questions before the Court were simple enough: did India lack jurisdiction to try the marines? If not, could this case be tried by the State of Kerala or the Indian Union? In formulating the issues, the Chief Justice (paragraph 82) and Justice Chelameswar (paragraph 2) oddly excluded the issue of sovereign immunity, despite arguments raised by Italy (paragraph 42) and India (paragraph 66) specifically on that point.

Addressing the question of territorial jurisdiction and that alone, the Chief Justice’s primary opinion proceeded along two lines of argument (given the finding that the incident occurred 20.5 nautical miles off the Indian coast, in the Indian contiguous zone): first, whether Kerala – as a federal unit within the Indian Union – had the jurisdiction to try the marines; and second, whether the Indian Union (India itself) possessed that competence.

(As a preliminary note, given that a negative conclusion on the second question would have precluded any discussion on the first, the judgment should perhaps have addressed the questions in the reverse order. In fact, in addressing the first question, the Court reached the conclusion that “the Union of India (is entitled to) to take cognizance of, investigate and prosecute persons who commit any infraction of the domestic laws within the Contiguous Zone.” (para 84) Having said this, the Court has already assumed a positive answer to the second question, which it then subsequently ‘considered’ for the remainder of the judgment.)

That apart, the first issue before the Court revolved around the effect of Notification No. SO 67/E (1981) under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (“TW Act”), which extended the application of the IPC to the Exclusive Economic Zone (“EEZ”). The Chief Justice concluded that though the Maritime Zone Act extended the application of the IPC to the EEZ (and thus the Contiguous Zone), the incident lay beyond the territorial jurisdiction of Kerala, which coincided with its territorial waters. The effect of the Notification then was to extend the powers of the Indian Union, and not of a federal unit within it. (A) Similarly, the Court held that the inclusion of Section 188A to the Code of Criminal Procedure (which extends Indian criminal jurisdiction to the EEZ) does not expand Kerala’s local jurisdiction and fails to justify the prosecution in the courts of Kerala. Equally, the Court considered this conclusion proper as a dispute between two nations took the matter “to a different level”, making a federal unit’s involvement incorrect as a matter of law. (B)

On the second question, the Court correctly identified the issue as whether India can exercise penal jurisdiction in its contiguous zone outside the limited rights granted under Article 33 of the UNCLOS. The Chief Justice’s judgment seems to rely primarily on the decision in Lotus (discussed previously here) which permits the exercise of jurisdiction on the passive personality principle. In doing so, the Court considered whether the subsequent addition of Article 97 of UNCLOS (and Article 11 of the Geneva Convention) to the legal regime had rendered the decision in Lotus inapplicable. Thus, in deciding that this case did not involve an ‘incident of navigation’ under Article 97 (for example, a collision), the Chief Justice followed Lotus. Justice Chelameshwar, in his concurring opinion, discarded Article 97 on alternate grounds, i.e. Part VII of the UNCLOS (in which Article 97 figures) applies only to the high seas and not to the EEZ (a conclusion that can be, and has been, disputed).

Importantly, and perhaps this is a fact that escaped media interest, the Court did not decide the question of jurisdiction conclusively. Rather, it noted that this judgment “will not prevent the Petitioners herein in the two matters from invoking the provisions of Article 100 of UNCLOS 1982, upon question of jurisdiction of the Union of India to investigate into the incident and for the Courts in India to try the accused may be reconsidered.” (C)

Given the breadth of the judgment, I will offer only a few preliminary thoughts here. On point A, the Court’s holding that neither Section 188A nor the Notification under the TW Act extended Kerala’s jurisdiction fails to enter several crucial debates, I have three comments. First, Section 188A – an amendment to the CrPC – was introduced by a Government Notification under Section 7 of the TW Act. In recognizing that such additions can be made only by Parliament, the Kerala High Court had disregarded Section 188A per se, but accepted the extension of Indian penal jurisdiction to the EEZ (based solely on the intention of the notification). However, while Section 7(7) permits the extension of any enactment to the EEZ, this is limited by Section 7(4) which recognizes the powers of the Union in the EEZ (along the lines of Article 56, UNCLOS). Crucially, the power to legislate for criminal conduct does not find a mention here (and this is so by design (Vol. III, pg. 61) and supported by subsequent state practice and judicial opinion). Second, as a matter of form, Section 7(7) permits the extension of the territorial scope of an enactment, rather than an amendment to the CrPC itself – the amendment of which should be dictated by Parliament alone. This is also important because of a distinction that the Court fails to recognize between Section 4, IPC/Section 188 CrPC and the facts of this case/Notification 671. The former permit prosecution of Indian citizens (on the active personality principle), while the latter dilute the principle to instances of passive personality jurisdiction (Indian national is the victim). The question then is not only of extending the scope of Indian penal jurisdiction territorially, but substantively, through executive action. Third, assuming the Indian union does have jurisdiction, the Court’s view that this does not extend Kerala’s jurisdiction does not appear appealing (though perhaps pragmatic from a diplomatic standpoint). This is because Notification 671 (on which the judgment relies) creates a deeming fiction which permits prosecution “as if it had been committed in any place in which he may be found”. Similar wording is found in Section 188 of the CrPC, and has been consistently held to allow the State in which the accused is found to continue prosecution (for example, Clara v. Tamil Nadu).

On point B, the Court considered the exclusion of Kerala’s jurisdiction proper as a matter of public international law. With respect, however, neither does public international law address the manner in which states structure their internal criminal processes, nor would any such rule apply since the Court (presumably) rejected the sovereign immunity defence, thus making the Italian marines liable as individuals and not representative organs of the Italian state.

On point C, the holding that international law permits the exercise of jurisdiction in this case, following Lotus, the Court’s conclusion is uncertain given the its remarks that Lotus has been watered down (paragraph 98; also see a previous post on this issue here, and the joint Separate Opinion issued by Judge Higgins, Koojimans and Burgenthal in Arrest Warrant here). In doing so, the Court failed to state whether international law permits such action (and if so, where may one find such a rule in the UNCLOS or under custom) or whether the absence of a prohibition suffices. In fact, the Court’s insistence on identifying the sovereign rights a state may exercise in the continuous zone was perhaps the incorrect question to begin with. This case does not involve the exercise of sovereignty (or more appropriately, jurisdiction) over an identifiable maritime space, but over the accused marines. This distinction is not one without reason: the exercise in this case is to identify whether public international law permits exercise of jurisdiction on the passive personality principle, which addresses the identity of the victims, and not the territorial space where the crime occurred.

Second, the Court’s handling of Article 100, UNCLOS is unclear. Not only does the text of Article 100 omit any reference to a redistribution of jurisdiction between states, but more fundamentally, omits any substantive obligation through the most generous of readings (the drafting history makes this conclusion clear, pg. 183). It seems then that the Court’s judgment relies too heavily on Article 100 for something that it does not address.

More generally, the Supreme Court’s judgment remains imprecise on the relationship between international law and (domestic) Indian law in such disputes. Ordinarily, it would be necessary to first identify a basis for exercising jurisdiction in Indian law (point A), and then proceed to test the validity of that determination against international law (point C), or use international law to colour the reading of domestic law. In addressing both questions together, the judgment perhaps sacrifices much needed clarity.

It’s official: Italian Marines won’t return; Italy initiates international dispute against India

According to a press-release issued by the Italian Ministry of Foreign Affairs today, the Italian marines facing trial in India for the shooting and killing of Indian fishermen off the coast of Kerala will not be returning to India. “Returning?”, you might rightly wonder, considering that the marines are under trial in India and have spent the past year or so imprisoned there. Turns out that the marines were allowed to go to Italy by the Indian Supreme Court to vote in the Italian parliamentary elections. (Now we know what happened in Italy!) Apparently, according to an Indian lawyer representing the marines, ”[t]he judges were sympathetic to the marines’ request to exercise their democratic right of casting their votes”.

As a preliminary matter, and correct me if I am missing something here, I have many dear Italian friends residing outside Italy, and all of them voted in the national elections by postal ballot. I wonder what made the Indian Supreme Court think that the marines needed to be physically present in Italy to exercise their franchise, when even the Italian government’s own website details the procedure of voting by post for Italians resident overseas. And, if the Court didn’t notice, why didn’t the counsels for the Indian government not point this out? Seems to me the curious case of a gun and a foot.

I should also note that this is not the first time the marines were given home leave to visit Italy. Last December, the High Court of Kerala had allowed the marines to go home to celebrate Christmas and the New Year with their families in Italy. Then, as well as now it seems, the Italian government, through its embassy in Delhi, submitted an undertaking in the Court guaranteeing that they would return to India and face trial. At the end of the first visit, the Italian government lived by its promise, and return they did in January. This time, however, things aren’t looking so nice. To refer to the Italian Ministry of Foreign Affairs press-release: “Italy informed the Indian government that, given the formal establishment of an international dispute between the two States, the riflemen Massimiliano Latorre and Salvatore Gironel will not return to India at the end of the permission granted to them” (Google translation).

Formal dispute? Yes. We know that following the arrest of the Indian marines in the Indian port of Kochi, Italy has persistently maintained that India lacks jurisdiction to try the marines. Even if the  Indian courts had jurisdiction, Italy argues that the marines would be protected by immunity by virtue of their position in the armed force. In India, these issues were thought to have been settled by a judgment of the Supreme Court, holding that India has jurisdiction to try the marines under its domestic criminal laws, and that any plea relating to immunity could only be raised and addressed during the actual trial process, and not a supreme court proceeding. Italy obviously disagrees with the Supreme Court’s ruling, and believes that it is contrary to India’s obligations under international law. Referring to the press-release again:

Italy has always held that the conduct of the Government of India violated the international law obligations imposed on India by virtue of customary law and treaty law, in particular the principle of immunity from the jurisdiction of the foreign state bodies and the rules of the Convention United Nations Convention on Law of the Sea (UNCLOS) of 1982.

In the aftermath of the judgment of 18 January 2013 of the Supreme Court of India, Italy has formally proposed to the Government of New Delhi, the start of a bilateral dialogue in the search for a diplomatic solution to the case, as suggested by the Court, where drew the hypothesis of cooperation between States in the fight against piracy, as envisaged by the above UNCLOS.
In light of the lack of response of India to the Italian request to enable such cooperation, the Italian Government considers that there is a dispute with India concerning the rules as contained in the Convention and general principles of international law applicable to the case.

Against this backdrop, the Italian ambassador in Delhi delivered today a note verbale to the Indian government notifying it of a formal dispute and expressing Italy’s

willingness to reach an agreement on a resolution of the dispute through international arbitration or judicial settlement, asking India to activate the consultations provided for in UNCLOS.

So why is it that the marines returned after their Christmas holiday in January, but will not be coming back this time? The answer seems to be in the Supreme Court of India’s judgment delivered on 18 January, after their return. The Court upheld India’s jurisdiction to try the marines. Up until then, Italy was obviously hopeful that the Supreme Court would side with its position. But with this judgment, it became clear that the prosecution in India would go ahead. And so, when the time came for the marines to board their return flight, following the great satisfaction that accompanies any voting exercise, they simply declined!

With this background, I hope to return soon with my thoughts on what lies ahead. For now, I hope that the Indian Supreme Court and the Government are happy with the results of the Italian elections (quite similar to what happens in India after every election), and the role they played in it!

Venice Academy of Human Rights 2013

Knut Traisbach writes in with more information about the 2013 session of the Venice Academy of Human Rights. Like last year, the faculty for this year’s session looks impressive, including: Profs. Jeremy Waldron, Malcolm Shaw, Brigitte Stern and Neil Walker, amongst other notable scholars. Here’s the call:

Venice Academy of Human Rights 2013

The Venice Academy of Human Rights will take place from 8 – 19 July 2013.
The theme of this year’s academy is ‘Obligations of States’

Online registration is open until 5 May 2013.

You can view the detailed programme here.

Faculty of the Venice Academy 2013

General Course
Jeremy Waldron
University Professor, New York University School of Law

Christian Reus-Smit
Professor of International Relations at the University of Queensland

Malcolm Shaw
Senior Fellow at the Lauterpacht Centre for International Law and Research Professor (formerly Sir Robert Jennings Chair) in International Law at the University of Leicester

Brigitte Stern
Professor of International Law at the University of Paris I, Panthéon-Sorbonne

Françoise Tulkens
former Judge and Vice-President of the European Court of Human Rights

Neil Walker
Regius Professor of Public Law and the Law of Nature and Nations at the School of Law, University of Edinburgh

Key Facts
Participants: Academics, practitioners and PhD/JSD students

Type of courses: Lectures, elective seminars and optional workshops
Number of hours: 24 hours of compulsory courses (plenum), min. 16 hours of elective and optional courses (smaller groups)

Location: Monastery of San Nicolò, Venice – Lido, Italy

Fees: 600 €

Venice Academy of Human Rights

The Venice Academy of Human Rights is an international programme of excellence for human rights education, research and debate. It forms part of the European Inter-University Centre for Human Rights and Democratisation (EIUC).

The Academy offers interdisciplinary thematic programmes open to academics, practitioners and doctoral students with an advanced knowledge of human rights.

A maximum of 60 participants will be selected.

Participants attend morning lectures, afternoon seminars and workshops and can exchange views, ideas and arguments with leading international scholars and experts. This includes the opportunity to present and discuss their own “work in progress” such as drafts of articles, chapters of doctoral theses or books and other projects.

At the end of the programme, participants receive a Certificate of Attendance issued by the Venice Academy of Human Rights.

Can run, but can you hide? Mohamed Nasheed, India and International Law

[This is a guest post by Mr. Raag Yadava, a B.A. LL.B. (Hons.) candidate (2013) at the National Law School of India University (Bangalore). Welcome to ILCurry, Raag!]

A year on from the coup, former President of the Maldives Mohamed Nasheed walked into the Indian Embassy in Male on Wednesday last week requesting temporary refuge in the face of an arrest warrant on charges of illegally detaining the Chief Criminal Court Judge Abdulla Mohamed.

Perhaps a belated reaction to the current regime’s cancellation of GMR’s $500 million investment into Male (discussed previously here), or to ensure Nasheed’s participation in the democratic elections scheduled for September, the former President’s presence in the Indian diplomatic mission comes at an important time for the Maldives.

This trend of offering ‘diplomatic asylum’ (or temporary refuge, which is more apt in this case) seems to be catching on, with WikiLeaks founder Julian Assange now closing in on 8 months in the Ecuadorian embassy in London, Chinese police chief Wang Lijun receiving ‘vacation-style treatment’ in the US Consulate in Chengdu and Chinese dissident Chen Guangcheng receiving protection in the US Embassy in Beijing. Can states, then, offer refuge to individuals in their diplomatic missions at the cost of “impeding the due process of law” of the host state? (that being the charge levelled by the Maldives’ Judicial Services Commission.). To be clear, Nasheed’s case is unlike most others – he is not fearful of long-term persecution, thus requiring resettlement or residence abroad. He has neither requested nor has India considered granting ‘asylum’.

The question here is more limited. Is India obligated to transfer Nasheed to the Maldives police? Simple answer: Yes. In 1950, the ICJ considered the legality of the residence of Peruvian politician Raúl Haya de la Torre in the Colombian embassy in Lima. In concluding that Colombia was under an obligation to return de la Torre absent a clear legal basis between the states, it stands to reason today (with five decades of supporting state practice) that while states are free to grant asylum to those on their territory, the provision of protection to a fugitive in another state’s territory (‘diplomatic asylum’) finds no basis in general international law. In fact, this tradition – rooted in the Latin America – finds legal support in the 1954 Convention on Diplomatic Asylum, a regional instrument.

Given recent instances, we could perhaps be witnessing the formation of a customary norm, but opposition by the host states (Britain, Maldives, China) makes this conclusion unappealing. Any exceptions that are to be drawn come from instances of immediate threat to life in civil war and the like; instances that could hardly appeal to this case. (here and here). Lastly, and perhaps I am reading into political statements beyond their worth, but Dr. Samad Abdulla, the Maldives foreign minister, seems to be stressing on the fact that India has not granted asylum to Nasheed. Political symbolism aside (and I don’t see much of that, given Nasheed is in safe custody beyond Maldivian control, irrespective of the label), I do not see the legal difference that would make.

The legality of India’s conduct apart, since such rigid insistence on international law is not entirely realistic, what options are open to the Maldives? Very few, really. Indian and Maldives are both parties to the Vienna Convention on Diplomatic Relations, Article 22 of which poses many problems for the Maldives: “1.The premises of the mission shall be inviolable. The agents of the receiving State may not enter them, except with the consent of the head of the mission.” The illegality of India’s conduct apart, the Indian diplomatic mission comes under that seemingly absolute protective umbrella. While the Convention requires diplomats (who, just like states, are not obliged to assist in criminal or civil matters absent a treaty obligation to that effect) to obverse local laws and regulations, and imposes a duty “not to interfere in the internal affairs of that State”, the self-contained regime of the Vienna Convention (see Tehran Hostages) does not permit the abrogation of that rule. As long as the premises is used for the purposes of the mission (and the Indian embassy in Male is), state practice does not support exceptions to Article 22 on account of mere violations of municipal law; the consequences of such an approach being disastrous to the conduct of business between governments. To the contrary, the Vienna Convention provides remedies –declarations of persona non grata or cessation of diplomatic relations, which I doubt are of much interest to the Maldives.

As the issuance of a second arrest warrant infuses urgency into talks, the western and India support for “inclusive” elections seems to tip the balance towards Nasheed, leaving an ad-hoc political settlement permitting Nasheed to contest the elections the most likely outcome.

BREAKING: Award in India-Pak Kishenganga Arbitration Delivered

The Kishenganga Tribunal at the PCA

A Tribunal constituted under the 1960 Indus Waters Treaty (also called the “Court of Arbitration” under the Treaty) today rendered its (partial) Award in a dispute between India and Pakistan over the construction of the Kishenganga hydro-electric power project by the former (previously covered here, here, and here). According to The Hindu, the Tribunal in its Award found that:

India can go ahead with the diversion of the waters of Kishanganga, a tributary of Jhelum, for hydro-electric power generation.

However, the court restrained India from adopting the drawdown flushing technique for clearing sedimentation in the run-of-the river project designed for generation of 330 MW power. India may have to adopt a different technique for flushing.

In the initial reports received by The Hindu it is learnt that the court also sought statistics on the environmental flows into the river downstream of the project.

To recall, Pakistan had originally requested the Tribunal to determine two issues:

1. Whether India’s proposed diversion of the river Kishenganga (Neelum) into another Tributary, i.e. the Bonar Madmati Nallah, being one central element of the Kishenganga Project, breaches India’s legal obligations owed to Pakistan under the Treaty, as interpreted and applied in accordance with international law, including India’s obligations under Article III(2) (let flow all the waters of the Western rivers and not permit any interference with those waters) and Article IV(6) (maintenance of natural channels)? [the “First Dispute”]

2. Whether under the Treaty, India may deplete or bring the reservoir level of a run-of-river Plant below Dead Storage Level (DSL) in any circumstances except in the case of an unforeseen emergency? [the “Second Dispute”]

From the above, it thus appears that the Tribunal found in favour of India on the issue of diversion (the “First Dispute”), but against it on the second issue of reservoir level (the “Second Dispute”).

As of writing this post, neither the Award nor a press-release was available on the Permanent Court of Arbitration website. As always, we hope that the Award will soon be made publicly available. ILCurry will bring you more detailed analyses as and when that happens.

UPDATE (19 Feb. 2013): The partial Award is now available on the PCA website here. A press-release is available here. According to the press-release:

In its Partial Award, which is final with respect to the matters decided therein, without appeal and binding on the Parties, the Court of Arbitration unanimously decided:

1. that the Kishenganga Hydro-Electric Project (KHEP) constitutes a Run-of-River Plant under the Treaty, and India may accordingly divert water from the Kishenganga/Neelum River for power generation by the KHEP in the manner envisaged. However, when operating the KHEP, India is under an obligation to maintain a minimum flow of water in the Kishenganga/Neelum River, at a rate to be determined by the Court in a Final Award.

2. Except in the case of an unforeseen emergency, the Treaty does not permit India’s reduction below “Dead Storage Level” of the water level in the reservoirs of Run-of-River Plants located on the rivers allocated to Pakistan under the Treaty. This ruling does not apply to Plants already in operation or under construction (whose designs have been communicated by India and not objected to by Pakistan)

The Court expects to be able to render its Final Award determining the minimum flow of water India would be required to release in the Kishenganga/Neelum River by the end of 2013.

 

More on this soon!

GMR, Maldives and International Law

I’ve been following the recent turn of events involving India’s GMR Group and the Republic of Maldives closely. The events raise very interesting issues relating to diplomatic protection, dispute settlement, and the international regulation of cross-border investment. These developments warrant closer scrutiny considering the growing public resentment against bilateral investment treaties (BITs) in India, following an adverse award by the Tribunal in White Industries v. India, with many calling for India’s renegotiation of, if not withdrawal from, these treaties and the investment arbitration mechanism.

The story…

To recall briefly, in 2010, the GMR Male International Airport Pvt. Ltd. (GMIAL) – a consortium of the Indian GMR Group (77%) and the Malaysia Airports Holding Berhad (23%) — was awarded a concession contract by the Maldivian government to build and operate the Ibrahim Nasser International Airport in Male for a period of 25 years. The contract, valued by some at over USD 500 million, is said to represent the single largest inflow of foreign investment in Maldivian history. GMIAL claims that it won the contract through an internationally competitive bidding process conducted by the World Bank’s International Finance Corporation. For Maldives, the contract was approved and signed in 2010 by the government of President Mohamed Nasheed. As we all know, however, earlier this year, President Nasheed was ousted in what he alleged was a military coup, and a new government came to power. Reportedly, GMIAL’s concession contract was questioned by the new government soon after it gained power. Most recently, on 27 November 2012, the Maldivian Government issued a notice to GMIAL asking it to hand over the control and operation of the Male airport to the government by 7 December 2012, claiming that the concession contract was void. The Maldivian government has also stated at several instances that it will pay compensation to GMIAL (without giving any further details).

Meanwhile, an arbitration proceeding was commenced in July 2012. I have been unable to get more details on this, but presumably this was done pursuant to an arbitration clause in the concession contract (and not an investment treaty), with GMIAL commencing the proceedings against the Maldivian government following the problems it faced once the new government came to power in February 2012 (feel free to correct me on this, of course). To make matters more interesting, on 3 December 2012, the High Court of Singapore granted injunctive relief to GMIAL against the Maldivian government’s notice of 27 November, restraining it from “interfer[ing] with the rights of the Investor (GMR-MAHB consortium) under the concession agreement.” Following this injunction, however, the Maldivian government stuck to its position, stating that its decision was “non-reversible and non-negotiable” and that the that Singaporean “judge was incorrect in interpreting the law as, where compensation is adequate, an injunction cannot be issued and a court cannot issue such an injunction against a sovereign state.” Maldives has appealed the order before the Supreme Court of Singapore, with reports suggesting that the appeal has been allowed. As things stand right now, it seems like the Maldivian government will go ahead and take control of the Male airport from GMIAL on 7 December. At the risk of sounding too human, let me only note that there must naturally be a lot of worried foreign faces in Male right now. Reports also indicate that GMIAL had not obtained political risk insurance for its investment.

Enter the Government of India…

Once the Maldivian government issued its notice of 27 November, the Indian government took notice of GMIAL’s case. In its initial response, the Indian government noted that the Maldivian government’s action “sends a very negative signal to foreign investors and the international community” and that it would continue to be seized of the matter. Subsequently, following a call by the Indian industrial association ASSOCHAM to exercise diplomatic protection, reports indicate that the Indian government has suspended the disbursement of foreign aid for Maldives. Following the injunction granted by the High Court of Singapore, the Maldivian foreign minister also spoke to his Indian counterpart. In its latest press release, the Indian Ministry of foreign affairs has stated that Maldives should follow the rule of law and that it ”expected that no arbitrary and coercive measures should be taken pending the outcome of the legal process underway. Resort to any such actions would inevitably have adverse consequences for relations between India and the Maldives.” Meanwhile, GMR has stated that it is committed to exploring all remedies available to it, including the option of going to the International Court of Justice (!).

So, what options for GMIAL now?

Right now, GMIAL is already part of a contractual arbitration proceeding against the government of Maldives. The arbitration is being controlled by the courts of Singapore — presumably the primary jurisdiction. If there is no misconduct on part of GMIAL (the IFC’s involvement certainly is very interesting, and rather redeeming), the arbitration might still lead to a NYC award enforceable somewhere.

In addition to this contractual arbitration proceeding, it has also been suggested that GMR should take the dispute to the ICJ. This obviously is not possible (since only States can seize the ICJ), but it is still important to see if India can exercise diplomatic protection and espouse GMR’s claim. Once India has domestically taken a decision to go to the ICJ, there are two ways to proceed: to submit the dispute to the Court by a special agreement, or to invoke the Court’s compulsory jurisdiction under Article 36(2) of the ICJ Statute. The problem with the latter is that the Maldives has not submitted a declaration accepting the Court’s compulsory jurisdiction under Article 36(2) of the ICJ Statute. India has a declaration, thus symbolically accepting the Court’s compulsory jurisdiction, but the acceptance is made practically worthless by a massive list of 12 reservations, thus giving away with one hand, what it took with the other. Therefore, unless Maldives accepts the Court’s jurisdiction and India does away with its reservation,  the only way out is for India and Maldives to seize the Court through a Special Agreement. Obviously, that would require a lot of convincing and diplomatic rigmarole, but it will be interesting to see how this develops.

Until now we’ve looked at the private (contractual) dispute settlement proceeding underway and the unlikeliness of a public dispute settlement proceeding at the ICJ. I am sure that there is at least a theoretical possibility of going to the domestic courts in Maldives. I do not know  enough about the courts there to comment on their independence, which I have to presume because of my ignorance. That’s the domestic public (court) option then. Of course, we are only talking of options here for finding jurisdiction. Whether GMIAL eventually succeeds in any of these proceedings will depend upon the specific facts of the case (e.g., GMIALs conduct), the terms of the concession contract and the applicable law.

But, what about investment arbitration?

Apart from all these options, there could have also been an option for GMR/GMIAL to commence a legal dispute under an investment treaty between India and the Maldives. I say “could” because, to my knowledge, there is no bilateral investment treaty between India and the Maldives. Further, I do not know of a trade agreement (including the SAFTA) between the two that includes an investment chapter. Without an investment treaty in place, the option of a treaty based arbitration does not exist. Having said that, it is still an option worth reflecting on. If nothing else, then only to think about India’s BIT program. This is particularly relevant given India’s first (and only public) loss in the White Industries arbitration under the India-Australia BIT. Post White Industries there has been a growing opposition in India against BITs and investment arbitration (some extreme voices, and some milder caveats). But, the discussion until now has been rather reactionary, operating in the shadows of White Industry. This turn of events involving the Maldives offers another perspective to inform the discussion, i.e. the utility of investment treaties in protecting outward FDI from India.

The first obvious question is: why doesn’t India have a BIT in place with the Maldives? As I set out to find an answer to this question, I proceeded on the assumption that the Indian BIT program was designed mainly to attract inward FDI, rather than protect outward FDI. My cursory empirical research, however, suggests otherwise. For example, of the top 15 destinations for outward Indian FDI, India does not have a BIT currently in force with only three states (US, UAE and Singapore), in addition to the Channel Islands and the British Virgin Islands (but I suppose India’s BIT with UK applies to these territories). The situation is similar for other developing countries, with India having a BIT with many of the states favored by Indian investors in Africa and Asia. Whatever the original intentions then, the design of India’s BIT program is not aimed at attracting FDI alone. Maldives  just happened to be one unlucky place? Maybe. Anyway, the point here is that any good BIT program for a growing economy should not only be designed for attracting inward FDI, but should account for outward FDI from that economy. India’s BIT program, at least on paper, appears to meet this standard since India has concluded investment treaties with several top destinations for outward FDI from India.

Will the Indian investor please stand up?

Another important insight to be gained from the Maldives story relates to the role of the industry in shaping India’s BIT program. Thus far, the participants in the discussion on Indian BITs have included the occasional academic, the disgruntled domestic lawyer (paywalled), the principled international lawyer (also paywalled), and a rather passive Indian government. There are good reasons for taking into account the perspective of an actual beneficiary of the BIT program, i.e. the Indian investor. Otherwise, any eventual policy risks becoming ultimately ineffective and irrelevant. Indian investors and companies can begin by forming a forum for discussing issues relating to international protection of investments. They could carry out a periodic survey of the most popular destinations for outward FDI from India, and make responsive suggestions to the government’s BIT program with specific countries. Individual investors concerned about the investment climate in countries with no BITs could ask the Indian government, through this channel, to try and negotiate one. To my knowledge, no such forum currently exists, with only commerce chambers like ASSOCHAM and FICCI making reactionary comments in specific cases. With growing outward FDI by Indian firms, a systemic analysis of the benefits of investment treaties for protection of outward Indian FDI by all stakeholders involved would certainly be helpful.

In another world…

I should conclude by presenting the scenario had an investment treaty been in force between India and the Maldives. For the investor (GMR/GMIAL), this would have provided another forum for lodging its claim against the Maldives, and having it adjudicated in a timely manner according to international standards for investment protection. For the Indian government, an investment treaty and an investor-state dispute settlement mechanism would have avoided the process of exercising diplomatic protection. It could have merely pointed GMR in the direction of the treaty, and could have avoided engaging in “gunboat diplomacy” by issuing threats of canceling foreign aid. In other words, a BIT could have depolitcized the international dispute. I should point out that the benefits of BITs and investment arbitration for India and Indian investors do not suggest that such a treaty would have been prejudicial to Maldives. A range of defenses would have been available to the Maldives, including many based on GMR/GMIAL’s misconduct (if any). As examples, I would only cite the cases of Fraport and Malicorp, both involving airport concession contracts which were terminated by the host State. In both treaty arbitration proceedings, the claims of the investors were rejected on grounds relating to investor misconduct (the Fraport award was subsequently annulled, but for different reasons). So, in another world, at another time, everyone could have lived happily ever after (almost)!

Update (7 December 2012): As my friend Manu Sanan points out, India actually does have an investment treaty with Singapore in the form of an investment chapter in the India-Singapore Comprehensive Economic Cooperation Agreement. Thus, India does not have an investment treaty with only two out of the top 15 destinations for outward Indian FDI.