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.