Jindal Commences Arbitration Against Bolivia

First, the wishes — A very happy new year to all our readers!

Moving on, recently, there has been news about the Indian company “Jindal Steel and Power” (different management from JSW, though both are part of the same OP Jindal Group)  filing a claim against Bolivia at the ICC International Court of Arbitration. The dispute concerns a 2.1 billion USD mining project in Bolivia. Here’s a brief overview of the facts, and the parties’ main arguments, as reported by The Hindu Business Line:

In 2007, Jindal scored a 40-year contract to mine the southeastern Mutun site near the Brazilian border, one of the richest iron ore deposits in the world, with estimated total reserves of 40 billion tonnes, according to officials.

But Jindal and the government of Evo Morales are currently at loggerheads over investments. The Indian group had been due to pay $600 million over two years, but only paid about 2 per cent of that amount, prompting Bolivia to seize $18 million in guarantees.

Jindal, meanwhile, claims that Bolivia has not upheld its part of the contract, under which the Government must ensure the supply of natural gas to operate the mining site —— about four to six million cubic metres per day.

That’s the most information currently available in the public domain, and, considering that the arbitration seems to be under an investment contract as India and Bolivia do not have a BIT in force between them, I don’t expect any more transparency in the future.

To my knowledge, this is the second reported arbitration proceeding in recent times to have been initiated by an Indian claimant. Earlier, an Indian lawyer had brought a claim against the United Kingdom, under the India-U.K. BIT in 2006.  The dispute concerned a disagreement between the lawyer and the Corporation of London over rent to be paid for a property leased from the city. An arbitral tribunal was constituted, and court proceedings were also initiated by the Corporation of London, with the court refusing to stay its proceedings in light of the ongoing arbitration.

The fact that, of the handful of known investment arbitration proceedings concerning India (I am aware of only five in recent times), two proceedings have been commenced by Indian claimants could be an indication that, with increasing outward FDI from India, Indian investors are increasingly seeking more security and predictability in the investment climate abroad. This suggests that India’s BIT program may no longer only be useful for attracting FDI, but could also be used for protecting the interests of Indian’s in foreign host states. It would also explain the recent signing of a bilateral investment treaty between India and Nepal, as there is considerable Indian investment in Nepal. The times, they are certainly changin’. Of course, I could be reading too much between the lines, since little data is available in the public domain.

Hat tip to Yogesh Pai for the news report on the Bolivian arbitration.