The failed agreement between Antrix and Devas Multimedia

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Why has a Canadian court ordered the seizure of over $ 30 million in IAA assets? How can a foreign power issue such an order?

The story so far: In 2005, Devas Multimedia signed an agreement with Antrix – a commercial arm of the Indian Space Research Organization (ISRO) – to provide multimedia services to mobile users using the leased S-band satellite spectrum to be provided by Antrix. In 2011, the UPA-2 government canceled the deal on the grounds that it needed S-band satellite spectrum for national security and other social purposes. This brutal cancellation led to three legal disputes – a commercial arbitration between Antrix and Devas Multimedia before the International Chambers of Commerce (ICC) and two arbitrations of bilateral investment treaties (BIT) brought by the Mauritian investors of Devas Multimedia in the context of of the ILO India-Mauritius. (CC / Devas tribunal) and by Deutsche Telekom – a German company – under the India-Germany BIT (DT Tribunal). India lost all three disputes.

THE ESSENTIAL

  • In 2005, Devas Multimedia signed an agreement with Antrix which was canceled in 2011. This abrupt cancellation led to an arbitration between Antrix and Devas Multimedia at the ICC and two BIT arbitrations. India lost all three disputes.
  • In view of India’s non-compliance, foreign shareholders of Devas initiated multiple lawsuits against India and were successful in securing a favorable order from a Canadian court. The Canadian court can do this through the concept of restrictive immunity.
  • The Canadian court can order the seizure of the assets of IAA, as India exercises extensive control over the entity, making IAA an extension of itself.

The ICC court ordered Antrix to pay more than $ 562.5 million in interest in damages to Devas for wrongly repudiating the contract. A US court in late 2020, rejecting all of Antrix’s claims, upheld the 2015 commercial arbitration award in favor of Devas. the CC / Devas and the DT the courts ordered India to pay damages of $ 160 million plus accrued interest to foreign shareholders of Devas and $ 132 million to Deutsche Telekom respectively. Meanwhile, the National Company Law Tribunal last year, on a case filed by the Indian government, ordered the liquidation of Devas Multimedia on the grounds that the company’s business was conducted fraudulently.

In view of India’s non-compliance, foreign shareholders of Devas have initiated multiple seizure proceedings against India in several jurisdictions to recover the sums ordered by the CC / Devas court. In this regard, they were successful in obtaining a favorable order from a Canadian court.

How can a Canadian court order the seizure of Indian assets while ignoring state immunity?

State immunity – a well-established principle of international law – protects a state and its property from prosecution in the courts of other countries. This covers both immunity from jurisdiction and execution. However, there is no international legal instrument in force dealing with state immunity in the municipal legal systems of different countries, which has created an international vacuum. As a result, countries have filled this void through their national laws and national judicial practices relating to state immunity.

Typically, leading jurisdictions such as Canada follow the concept of restrictive immunity (a foreign state is immune only for sovereign functions) and not absolute immunity (complete immunity from all legal proceedings before a foreign court). As part of the execution of the powers of the BIT, this implies that State property serving sovereign functions (buildings of diplomatic missions, assets of the central bank, etc.) cannot be seized. However, properties used for business functions are available for entry. Since IAA assets are used for a commercial and non-sovereign activity, under the Canadian State Immunity Act, RSC 1985 (CSIA), they can be joined.

How to seize the assets of IAA when the claim is against India?

In an enforcement proceeding, the assets of an entity may be seized if that entity is an alter ego of the State which does not comply with the arbitration award. In other words, if the foreign sovereign exercises such extensive control over the entity, the presumption that the entity has a separate legal personality is set aside. Thus, the Canadian court had to conclude that the Indian government largely controls AAI.

What options does India have?

The first option is to comply with the two unfavorable attributions of the BIT. However, India is highly unlikely to do so. The second option is to challenge this decision in a court of appeal in Canada under Canadian law where India can try to prove that the “extended review requirement” is not met in the case of the IAA. and, therefore, it is not the alter ego. Nonetheless, it is important to keep in mind, as was held in a case known as MINE v Guinea, state immunity from execution is purely a procedural obstacle to the enforcement of the BIT award. It cannot justify India’s violation of its international law obligations enshrined in the two BITs and continued non-compliance with arbitral awards.

Prabhash Ranjan is Professor and Associate Dean, Jindal Global Law School, OP Jindal Global University.


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