BREAKING: Final Award Issued in the Kishenganga Arbitration

The Court of Arbitration (CoA) constituted under the Indus Waters Treaty delivered its Final Award in the Kishenganga Arbitration between Pakistan and India on 20 December 2013. As reported previously, the CoA issued a Partial Award in the matter on 18 February 2013. The Partial Award allowed India to proceed with the construction of its Kishenganga Hydroelectric Power Project (KHEP), subject to ensuring a minimum downstream flow of water to be determined in the Final Award. It also prohibited India from using drawdown flushing for sediment control at the KHEP and any future run-of-river plant on the Western Rivers. (For more information on the Partial Award and the background to the dispute, please see my ASIL Insight on the Partial Award available here and here.)

In its Final Award, the CoA determined the minimum downstream flow of water to be ensured by India. The Parties’ submissions for the second phase of the proceedings included data on the water flow in the Kishenganga river, effect of the minimum flow of water on power generation, agriculture uses in the Neelum valley, and the environmental impact of the KHEP. The CoA described its task in the second phase of the proceedings as follows:

Taken as a whole, the task facing the Court — now having the benefit of significantly more information and analysis from the Parties — is to determine a minimum flow that will mitigate adverse effects to Pakistan’s agricultural and hydro-electric uses throughout the operation of the KHEP, while preserving India’s right to operate the KHEP and maintaining the priority it acquired from having crystallized prior to the NJHEP. At the same time, in fixing this minimum flow, the Court must give due regard, in keeping with Paragraph 29 of Annexure G, to the customary international law requirements of avoiding or mitigating trans-boundary harm and of reconciling economic development with the protection of the environment.

(Final Award, para. 87)

Having considered the Parties’ submissions, the CoA decided that “India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times at which the daily average flow in the Kishenganga/Neelum River immediately upstream of the KHEP meets or exceeds 9 cumecs.”

However, it also held that “[a]t any time at which the daily average flow in the Kishenganga/Neelum River immediately upstream of the KHEP is less than 9 cumecs, India shall release 100 percent of the daily average flow immediately upstream of the KHEP into the Kishenganga/Neelum River below the KHEP.” (Final Award, p. 43)

The CoA allowed the Parties to seek a reassessment of the minimum flow through the mechanisms in the Indus Water Treaty 7 years after the diversion of water from the Kishenganga river for power generation at the KHEP. Finally, the CoA noted that the “Final Award imposes no further restrictions on the operation of the KHEP” (Final Award, p. 43)

With respect to India’s request for a clarification, as to whether the CoA’s prohibition on the use of drawdown flushing contained in the Partial Award applied only to the KHEP or to all/any future hydroelectric projects on the “Western Rivers” under the Indus Waters Treaty, the Court issued a separate Decision on 20 December 2013, finding that the prohibition on drawdown flushing is of a “general application”, and is not limited to the KHEP alone.

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.

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.

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.

Indian SC delivers judgment in Kaiser, overrules Bhatia

Readers interested in international arbitration would be aware of what have been called the “misgivings”of the Indian courts on international arbitration. The Supreme Court has rendered several controversial judgments on the Indian Arbitration Act of 1996 in the past, none being more infamous than the Bhatia International judgment. In Bhatia, the Court held that Part I of the Indian Arbitration Act is also applicable in proceedings for the enforcement of foreign arbitral awards, even though Part II of the law deals with the “enforcement of certain foreign awards”, unless the applicability of Part I has been excluded by the parties. A result of this was that Indian courts could set-aside foreign arbitral awards under Section 34 of the Act contained in Part I. This was considered anomalous by many in the international arbitration community in so far it allowed Indian courts seized with the enforcement of foreign awards (“secondary jurisdication”) to not just deny enforcement, but even set-aside the foreign arbitral (a task usually reserved for the courts of the “primary jurisdiction” — the seat).

Now, in Kaiser Aluminium, the Court has overruled Bhatia, holding that there is complete “segregation” between Parts I and II of the Indian Act. With this, the Court moves towards an understanding of the proper functions of the courts of the primary and secondary jurisdiction:

Thus, it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being
conducted. Such a court is then the supervisory court possessed of the power to annul the award. (para. 128)

The Court concludes:

198. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.

No doubt, the judgment would be welcomed by the international arbitration community to the extent it brings Indian law and practice in conformity with internatioanal practice and standards.

Moreover, having read the Court’s decision once, in my opinion the Court’s engagement with international arbitration at a conceptual level would go a long way in promoting consistency and sound practice in the enforcement of foreign arbitral awards in India. I have long believed that the problems relating to the enforcement of foreign arbitration awards in India have resulted from a failure of the Indian courts to conceptually engage with international arbitration. Thus, for example, Indian courts have, in my opinion, relied overly upon textual and contextual tools of interpretation, without promoting a conceptual understanding of international arbitration first. Kaiser seems to mark a welcome departure from this trend. The counsels and the Court have for the first time engaged in a thorough analysis of fundamental issues such as the territoriality and delocalization of international arbitration. Whereas these terms may be very familiar to international arbitration lawyers, the discussion in India hitherto has almost always avoided this framework. So, apart from the welcome commercial implications of the decision, I hope that the judgment would also help promote a better understanding of international arbitration in India, both amongst the courts and the scholars. Indeed, now that the Bhatia saga is over, and with the attempt in Kaiser to conceptually analyze arbitration, hopefully we can move on to further fine tuning Indian arbitration law to the demands of the transnational economic order.

The full-text of the judgment (.pdf) is available here.

The Enrica Lexie Incident and International Law: Some Preliminary Thoughts

I am sure all are aware of the recent turn of events involving the Italian ship M/V Enrica Lexie off the Indian coast of Kerala. In this post, I will try to present a reductionist perspective of the problem and comment upon the relative strengths of India and Italy’s arguments, the eventual goal being to parse through the technical details that have been sporadically filtering through the media and elucidate the the basic legal framework which can then be applied to the facts as and when they become clearer.

Already, the incident has created great interest amongst the Indian and Italian press and media. Other’s who have chipped in with their opinions include Meghnad Desai (comparing the Enrica Lexie incident to the one involving Indian children being taken into care by Norway, he asks: “[b]ut the two disputes do pose a paradox in justice. If we apply domestic law, the Italian naval personnel are to be tried in a Kerala court. But then are the children of the Bhattacharyas legitimately held by the Norwegian welfare agencies?”) and K. R. A. Narasiah (arguing “that Italy is wrong on sea law”).

MV Enrica Lexie off Kochi Source: Aijaz Rahi/Associated Press

Conflicting Factual Narratives

Although the exact factual circumstances still remain clouded, a broad overview of the conflicting narratives by India and Italy is perhaps still in order. India claims that the fishing boat, St. Antony, carrying 11 unarmed crew reported being fired upon at  2150 hrs, 2 or 3 nautical miles off the coast of Kollam in Kerala. Of the 11 fishermen, 9 were sleeping and the two awake were shot. In total, India claims that 20 shots were fired by the two Italian marines. Moreover, India claims that no warning shots were fired by the marines, who took the fishing boat to be a pirate vessel. Italy, on the other hand, claims that at 1600 hrs, while navigating 33 nautical miles off the Indian coast, a twelve meters boat with six armed men was spotted approaching the Italian tanker. It kept nearing even after the soldiers showed their guns at which point they opened fire in the air and in the water and the  boat turned away without any one being hit. Enrica Lexie immediately reported the incident to authorities in Rome. In addition, Italy also claims that the ship was tricked into coming to Cochin Port by a message from the Indian Coast Guard by reporting that they were holding a boat with arms on board, prospecting it could have been the one involved in the incident of the afternoon and inviting the Italian crew and marines to give their statements (see here, for example). For our purposes, I would only like to emphasize the different accounts of the position of the ship during the incident: Italy says that satellite data confirms that the ship was 33 nautical miles of the Indian coast, whereas India says it was 2-3 nautical miles off the Indian coast.

Current Situation

The situation, at the time of writing, is that the marines have been taken into custody by the local Indian police and have been sent to a 14 day judicial remand. A first information report has been filed against the Italian crew, and the Indian police have been on board the ship to gather evidence. The two marines have been charged with murder under the Indian Penal Code (IPC). Currently, the ship is docked in Kochi (apparently, parking space there seems quite expensive by even the most expensive car-park standards ~ 4 mil. INR). The Italians have reportedly also filed a habeas corpus petition before the Kerala High Court. Italian diplomats have been arriving in India on the clock, and have met the arrested marines. A senior Italian minister is expected to arrive in Delhi this week. Meanwhile, back in Italy, the authorities have started their own national investigations into the incident. Thus, the judicial processes have been set into motion in both countries, with India having a tangible advantage because of its custody of the marines.

Legal Disagreement

Getting into the legal issues, the disagreement between the two state seems to be centered around two issues: jurisdiction; and, diplomatic immunity. In this post, I hope to address the issue of jurisdiction, since the disagreement there concerns whether the Indian courts even have the power to try this case. This, therefore, is a preliminary issue that requires to be addressed first.

Jurisdiction under International Law

On the role and importance of jurisdiction (or the authority to decide on an issue) under international law of the seas, Natale Klien provides a concise explanation:

Law enforcement powers are essential to enable states to respond to maritime security threats. Although this point is simple enough in itself, the laws according states jurisdiction are complex because of the different rights and obligations recognized in the various maritime zones. The regulation of activities at sea is dependent on what authority states have in any given maritime area or over any particular vessel or installation or structure located at sea. The ability of a state to undertake law enforcement not only varies because of the different rights and duties existing in the different maritime zones, but also according to what particular threat to maritime security is being addressed. While there is a general interest in upholding order at sea, the accepted responses to achieve order have been countered by other interests, especially the importance of territorial integrity and the corollary of maintaining exclusive rights over vessels that are flagged to the state. This balancing act is constantly at stake in seeking to prevent and respond to maritime security threats. (Natalie Klein, Maritime Security and the Law of the Sea (OUP, 2011), p. 62)

She goes on to explain the nuanced picture of jurisdiction painted by International law: prescriptive jurisdiction refers to refers to the power to adopt legislation and other rules; and, enforcement jurisdiction refers to the power to give effect to those rules through police and/or judicial action. Moreover:

States are entitled to exercise jurisdiction on the basis of different connections that a particular activity might have with them. The bases of criminal jurisdiction most commonly recognized are territorial; nationality; passive personality; universal; and protective. Territorial jurisdiction entitles a state to regulate persons and activities within its territory. Nationality jurisdiction allows states to regulate the activities of persons who have the nationality of that state. On the basis of passive personality, a state may exercise criminal jurisdiction over a person who has committed offences that are harmful to nationals of that state. Universal jurisdiction refers to jurisdiction over particular activities that are considered so heinous (notably, piracy and war crimes) that all states may exercise jurisdiction over the perpetrators of those crimes irrespective of any other link a state may or (p. 63 ) may not have with the acts in question. Protective jurisdiction entitles states to exercise jurisdiction over activities considered prejudicial to the security of the state. As may be readily perceived, each of these bases of jurisdiction may be brought to bear in addressing maritime security threats, especially territorial, universal, and protective jurisdiction.

A state must lawfully exercise prescriptive jurisdiction in order for the possible exercise of enforcement jurisdiction to arise.

(FN omitted, emphasis supplied).

Can Indian Courts Try the Accused Italian Marines?

With this brief excursion into the concept of jurisdiction under international law, let us now turn back to whether international law provides Indian courts the jurisdiction to try the Italian marines for their alleged shooting of Indian fishermen. For our purposes, the relevant treaty is the UN Convention on the Law of the Seas 1982 (UNCLOS), to which India and Italy are parties, and the relevant Indian legislation isThe Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act 1976.

The UNCLOS and the 1976 Act establish the following regime for the coastal state’s (here, India’s) jurisdiction:

Territorial Sea: breadth of of up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with the UNCLOS. (Art. 3 UNCLOS) The sovereignty of a coastal State extends, beyond its land territory and internal waters and, in the case of an archipelagic State, its archipelagic waters, to an adjacent belt of sea, described as the territorial sea. (Art. 2 UNCLOS). For our purposes, the 1976 Indian Act in Section 3 provides that “[t]he sovereignty of India extends and has always extended to the territorial waters of India and to the seabed and subsoil underlying, and  the air space over such waters.” Thus, the Indian Penal Code, under which the marines are charged, is an exercise of prescriptive territorial jurisdiction. In other words, India can exercise both prescriptive and enforcement jurisdiction in the territorial sea on the issue of security (taking the killing of fishermen to be this issue).

Beyond the territorial sea lies the contiguous zone, extending not beyond 24 nautical miles from the baselines from which the breadth of the territorial sea is measured. (Art 33, UNCLOS) The 1976 Indian Act also defines the contiguous zone as such. This is an interesting region because it marks a divergence in the prescriptive jurisdiction under the UNCLOS and the 1976 Indian Act. Art. 33 of the UNCLOS provides in part that a coastal State may exercise the control necessary to: (a) prevent infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea; and, (b) punish infringement of the above laws and regulations committed within its territory or territorial sea. The 1976 Indian Act adds one more item to the list of areas coastal states can exercise their prescriptive jurisdiction in by legislating rules: the security of India (Art. 5(4) 1976 Act). This is not a conflict, for the UNCLOS only states that a coastal State “may” legislate to regulate the two areas, and the Indian Legislation goes beyond and adds one to the list. Moreover, there is considerable state practice in support of states exercise prescriptive jurisdiction for security matters in the contiguous zone (see table on p.14 here, and Alan Vaughan Lowe and R. R. Churchill On the Law of the Sea, pp.116-118 here).

Interestingly, under the 1976 Indian Act, unlike for territorial waters, India does not have complete sovereignty over contiguous zones. Instead, under Section 5(4), the Central Government may exercise such powers and take measures in or in relation to the contiguous zone as it may consider necessary with respect to: (a) the security of India; and (b) immigration, sanitation, customs and other fiscal matters. For example, one exercise of prescriptive jurisdiction in the contiguous zone is Section 2(28) of the Indian Customs Act, which defines “Indian customs waters” as the contiguous zone, within which Indian customs authorities have the power to arrest people (104), stop and inspect any ship (106), and open fire if a ship fails to stop (115(1)(c). Contrary to this, to my knowledge, the Parliament has not legislated on the subject of security in the contiguous zone. In this regard, the Indian Penal Code does not say anything about its extension over contiguous zone, whereas the Central Government has the explicit authority to extend its application over this region (Section 5(4)(b) 1976 Act). Thus, for the purposes of Indian courts criminal jurisdiction, this would mean the exercise of extraterritorial jurisdiction.

Exclusive Economic Zone: The EEZ concept is an innovation of the UNCLOS at the international level. It is reflected in the 1976 Indian Act, as well, and extends to 200 nautical miles from the appropriate baseline. Within the EEZ, states have the prescriptive jurisdiction to regulate exploitation of economic resources, scientific research, marine environment and artificial structures. This too, then would imply the exercise of extraterritorial jurisdiction by Indian courts.

This then establishes the importance of the exact location of the incident. For if the shooting took place 2-3 nautical miles from the coast, as India claims, it would be within the territorial waters, and therefore Indian courts could exercise their territorial jurisdiction under the IPC and Code of Criminal Procedure (Cr. PC). If, however, the incident occurred beyond 12 nautical miles from the baseline, take the 33 nautical miles which Italy claims for example, Indian courts would be exercising their extraterritorial jurisdiction under the IPC and the Cr. PC.

As noted in the quote from Klein above, extraterritorial jurisdiction may be exercised on several basis. Indian law, that is, the IPC and the Cr.PC, allows the exercise of extraterritorial jurisdiction on the basis of nationality. Thus, Section 4 of the IPC provides, in part:

Extension of Code to extra-territorial offences.–The provisions of this Code apply also to any offence committed by– (1) any citizen of India in any place without and beyond India; (2) any person on any ship or aircraft registered in India wherever it may be.

If the incident occurred beyond 12 nautical miles Indian courts can only have jurisdiction over offenses committed by a citizen of India, or a ship registered in India. Since, in the present case, the accused are marines of Italian nationality and the ship is also registered in Italy (contrary to what Meghnad Desai seems to think, see this), Indian courts do not have the extraterritorial jurisdiction to try the marines. This could be a basis for the Italian writ petition in the Kerala High Court. In fact, in a prior case (Raymund Gencianeo v.State of Kerala, 2004 Cri. LJ 2296), the Kerala High Court has held that:

Since the case of the prosecution is that the occurrence took place when the ship was 850 miles away from seashore, even if that 850 miles is taken as nautical miles or land miles, it is clear that the offence is alleged to have been committed by a foreign national in foreign vessel outside the territory of India. The Indian Courts have no jurisdiction to try an offence which is alleged to have been committed by a foreign national in a foreign vessel outside the territory of India and hence the proceedings in the case are liable to be quashed. (para. 6)

The facts in that particular case involved a Philippine national, who was a crewmember of a Japanese vessel, being prosecuted for the offence punishable under Section 307 of the IPC, alleging that he attempted to commit murder of the Captain and Chief Officer of the ship while he was on board the ship, 850 miles away from the Kochi coast. The accused was arrested on 29.11.2002 and placed in judicial custody. While the case against him was pending before the First Additional Assistant Sessions Judge, Ernakulam, he sought to quash the proceedings by contending that the courts in India have no jurisdiction to try the case since the allegation is that a foreign national committed the offence in a foreign vessel while the vessel was outside the territory of India.

Returning to the present, nobody is claiming that the ship was 850 miles off the coast of India. Nevertheless, this judgment does seem to suggest that Indian courts can only exercise criminal jurisdiction over foreign nationals on foreign ships if they are within the territorial waters of India (12 nautical miles).

In sum, the location of the shooting incident is of utmost importance. If it is not within 12 nautical miles, going by the above account, the trial court in Cochin may not have jurisdiction over the alleged offense. Of course, this is qualified by the presence of any government regulation extending the IPC over the EEZ — something which to my knowledge doesn’t exist.

Assessing Indian Reactions

While researching on the facts for this post I came across an interesting Indian reaction on the jurisdiction issue in The Hindu:

But India points to Section 4 of the Indian Penal Code, which says any crime committed against an Indian or on an Indian vessel, “wherever it may be,” can be tried in India.

“So there is extra-territorial application of both Indian and Italian laws. We understand that but as representatives of India, we will go by the legal process here. There are differences with Italy on the facts, procedure and processes, but we are willing to engage with them. If they so desire, we will provide consular access to the two marines detained by the Kerala police,” official sources said.

Officials also admitted that both countries were facing an issue of this kind for the first time. “We are trying to come to grips with, and see how to go about, it.”

They felt that whether or not the ship was in India’s exclusive economic zone (EEZ) shouldn’t be made an issue. “Italy and India have the same clauses pertaining to extra-territorial jurisdiction. The ship was over 5,000 km away from the Italian coast. Don’t make an issue out of the EEZ aspect.”

However, as we have seen above Section 4 of the IPC does not say that “any crime committed against an Indian or on an Indian vessel, “wherever it may be,” can be tried in India.” Instead, it says that crimes committed by Indian nationals, or by foreign nationals on vessels registered in India can be tried in India. Moreover, the last part of the above quote makes little sense. The fact that the incident occurred in the EEZ is of prime importance. Just because the ship was closer to India than Italy does not give India the jurisdiction to try the marines. Indeed, if the incident did occur in the EEZ, Indian courts may well not have the power to try the case.

What next?

Considering the worst case scenario for India, that the incident did occur beyond 12 nautical miles and outside India’s territorial waters. If India sticks to its stand to prosecute the marines under Indian law and in Indian courts (the Indian Defense Minister recently suggested this), Italy could possibly take up the matter on the International level, by submitting a dispute to the International Tribunal for the Law of the Sea, or some other international court or tribunal by consent.

If the matter does go to an international court, it may be useful to recall what the ITLOS has said on a similar issue in the past in the M/V ‘Saiga’ (No. 2) case:

 The ITLOS decision in M/V ‘Saiga’ (No 2) provides some indication that states may not seek to enforce laws that are not specifically related to coastal state rights in the EEZ. In that case, the M/V ‘Saiga’, an oil tanker sailing under the flag of Saint Vincent and the Grenadines, entered the EEZ of Guinea to supply fuel to three fishing vessels. Guinean customs patrol boats arrested the vessel outside of Guinea’s EEZ and subsequently detained the vessel and crew members. Guinea asserted that the arrest of the M/V ‘Saiga’ had been executed following a hot pursuit motivated by a violation of its customs laws in the contiguous zone and ‘customs radius’ of Guinea. Under Guinea’s Customs Code, the ‘customs radius’ extended 250 kilometres from its coast. Saint Vincent and the Grenadines maintained that Guinea was not entitled to extend its customs laws to the EEZ and that the Guinean action had interfered with the right to exercise the freedom of navigation as the supply of fuel oil fell within ‘other internationally lawful uses of the sea related to’ the freedom of navigation. The Tribunal determined that the application of customs laws to parts of the EEZ was contrary to UNCLOS. From this case, it seems that coastal states’ enforcement powers in the EEZ are therefore not likely to be recognized as lawful beyond those relating to the activities over which coastal states are specifically attributed jurisdiction or sovereign rights. (Klein, p. 89; FN omitted)

After all this legal analysis, if there’s any certainty, it is on the importance of the exact location where the Italian marines on board MV Enrica Lexie allegedly shot the Indian fishermen. Once that is ascertained, however, a definitive legal answer on whether Indian courts have the jurisdiction over the alleged crime can be given. All this, of course, if I am not overlooking an Indian legislation that extends the criminal jurisdiction of Indian courts beyond the 12 nautical miles — feel free to weigh in.

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.

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] 

International Law and the India-Australia Uranium Deal

Australia’s ruling Labour Party recently voted to allow the sale of Uranium to India. The decision was taken at the 46th national conference of the Party, with 206 votes for and185 against.

The Problem

However, even as we may be one step closer to the revocation of Australia’s Uranium sale ban, according to Don Rothwell of ANU, the sale of any Uranium by Australia to India would be inconsistent with Australia’s obligations under the South Pacific Nuclear Free Zone Treaty (“Rarotonga Treaty”; Wiki here; full text here). The Rarotonga Treaty aims at creating a nuclear-weapon-free-zone in the South Pacific. Here is a map identifying the states that have signed and ratified the Treaty:

                Parties to the Rarotonga Treaty

Although India is not a party to the Rarotonga Treaty, and therefore not bound by it, the Treaty imposes obligations upon Australia that restrict its ability to supply fissionable materials and equipments to other states. Specifically, Article of the Treaty titled “Peaceful Nuclear Activities” provides:

Each Party undertakes:

(a) not to provide source or special fissionable material, or equipment or material especially designed or prepared for the processing, use or production of special fissionable material for peaceful purposes to:

(i) any non-nuclear-weapon State unless subject to the safeguards required by Article III.1 of the NPT, or

(ii) any nuclear-weapon State unless subject to applicable safeguards agreements with the International Atomic Energy Agency (IAEA).

Any such provisions shall be in accordance with strict non-proliferation measures to provide assurance of exclusively peaceful non-explosive use;

(b) to support the continued effectiveness of the international non-proliferation system based on the NPT and the IAEA safeguards system.

For the purposes for Article 4, “nuclear-weapon states” are the five nuclear weapon states party to the Nuclear Non-Proliferation Treaty (NPT) (US, UK, Russia, France and China).

Applying the provision to the scenario at hand, Article 4 prohibits Australia from supplying Uranium to India, unless India agrees to the safeguards required by Article III.1 of the NPT. As readers may be aware, India did sign a safeguards agreement with the IAEA (yet to be ratified by India) as a part of the recently concluded and much controversial civil nuclear deal with the US. However, the key issue, as Rothwell notes, is the scope of the safeguards India has accepted. Specifically, the India safeguards agreement with the IAEA is based upon the IAEA’s “facility specific” safeguards (INFCERC 66 Rev. 2), with some India specific modifications. Under this “facility specific” agreement, India has only accepted safeguards on certain foreign-supplied reactors and facilities.

Article 4 of the Rarotonga Treaty, on the other hand, requires India to accept safeguards provided for in Article III.1 of the NPT in order for Australia to supply it Uranium. The safeguards agreement required of non-nuclear weapons state under Article III.1 of the NPT is a “comprehensive safeguards agreement” (a.k.a. “full scope safeguards”). The IAEA has issued a standardized form of such a comprehensive safeguards agreement (INFCIRC 153), with the basic obligation thereunder being:

to accept safeguards…on all source or special fissionable material…for the exclusive purpose of verifying that such material is not diverted to nuclear weapons or other nuclear explosive devices.

As such, it does seem that international law requires India, as a non-nuclear weapon state, to agree to comprehensive safeguards with the IAEA in case it wishes to source Uranium from Australia. A comprehensive safeguards agreement would require India to, amongst others, subject all its nuclear facilities (both civilian and military) to IAEA safeguards. Since the current India-IAEA safeguards agreement is facility specific, it appears that Article 4 prohibits Australia from supplying Uranium to India. If the deal does go forward, which looks quite likely in light of the recent vote, It will be interesting to hear the Gillard government’s position on this.

A way out?

The above analysis flows from a strict interpretation of Article 4 of the Rarotonga Treaty, which undoubtedly suggests that under the current situation the Treaty prohibits Australia from supplying Uranium to India. Joelien Pretorius of the University of Western Cape, in a recent analysis (paywalled) of the Pelindaba Treaty (establishing the African Nuclear Free Weapons Zone) and Africa-India nuclear cooperation, however, offers possible alternatives to the conclusion reached above.

Although Pretorius agrees that a strict interpretation of Article 9 of the Pelindaba Treaty leaves no doubt that African states party to the Treaty cannot supply Uranium to India under India’s present safeguards arrangement, she notes that a “minimalist” interpretation of the Pelindaba Treaty would legalize Uranium exports to India. Such minimalist interpretation relies upon the text of Annex II, paragraph 3 of the Treaty. Annex II concerns the safeguards that member states have to sign with the IAEA. Paragraph 3 reads:

For the purpose of this Treaty, the safeguards referred to in paragraph 1 above shall have as their purpose the verification of the non-diversion of nuclear material from peaceful nuclear activities to nuclear explosive devices or for purposes unknown.’

Based on this requirement, Pretorius argues:

If this restricted meaning of a safeguard agreement is extended to what is expected of recipient states, the India specific IAEA safeguard agreement arguably meets this requirement, as it establishes verification of non-diversion from India’s civil to military programmes.

Although Pretorius offers such an interpretation she does go on to add a cautious note that this would be a “disingenuous attempt to evade Article 9(c)’s explicit prohibition of uranium exports to states without comprehensive safeguards.”

Since the text of Annex II of the Pelindaba Treaty is very similar to the text of Annex 2 of the Rarotonga Treaty, such a minimalist interpretation may be also be possible under the Rarotonga Treaty. One point to note, however, is that the respective Annexes of both the treaties describe IAEA safeguards with respect to provisions other than the one which explicitly concerns the supply of Uranium to India. Thus, paragraph 1 of Annex II of the Pelindaba Treaty concerns “safeguards referred to in subparagraph (b) of the article 9”, whereas the provision applicable to Uranium supply to India is Article 9(c).  Similarly, Annex 2 of the Rarotonga Treaty concerns “safeguards referred to in Article 8”, whereas Article 4 is the relevant provision for the supply of Uranium to India.

Apart from such textual interpretation, Pretorius also offers a possible way out based on a contextual and teleological reading of the Pelindaba Treaty and notes:

In this respect, it could be argued that India–Africa civilian nuclear cooperation has the potential to promote the Pelindaba Treaty’s goal of reaping the economic benefits of nuclear energy for development.


[I]t it would be in the interest of African leaders to move beyond a romanticised notion of a common non-aligned identity with India, and develop a comprehensive understanding of the health, environmental and economic implications of increased uranium mining and exports to India, before they enter into agreements with India. If signatories to the Pelindaba Treaty see fit to evade the explicit prohibition on trade with non-nuclear weapon states (which India remains per the NPT definition) without an IAEA comprehensive safeguard agreement, the treaty’s emphasis on human security should, at least, be taken seriously.

This contextual reading of the Pelindaba Treaty is obviously treaty and region specific, however, a similar analysis under the Rarotonga Treaty could offer a starting point for justifying the supply of Uranium by Australia to India under the relevant rules of international law.


Text of the Rarotonga Treaty | Text of the Pelindaba treaty

[Note: This is an updated version of the post first published on December 3, 2011]

New WTO Appellate Body Members Appointed

Two new Members, an Indian and an American, were recently appointed to the WTO Appellate Body, the apex adjudicatory body for inter-state disputes under WTO law. The WTO website notes:

Dispute Settlement Body (DSB) appointed on 18 November 2011 the following two new members to the seven-member Appellate Body: Messrs Ujal Singh Bhatia of India and Thomas R. Graham of the United States for four years commencing on 11 December 2011.

Mr. Bhatia and Mr. Graham replace AB Members Ms. Lilia Bautista (Philippines) and Ms. Jennifer Hillman (US), whose terms are set to expire soon. The biographical note for Mr. Bhatia, a retired Indian bureaucrat and diplomat, is available here. Mr. Graham’s background is detailed here and here.

ILCurry thanks Ms. Hillman and Ms. Bautista for their contribution to WTO dispute settlement, and wishes Mr. Bhatia and Mr. Graham the best for their terms.