Year: 2012

Now that the Supreme Court has cancelled the licences issued for 2 G , (122 Licences),which includes Telenor and Etisalat  the other important Company -Sistema Telecom,MTS,  which has Russian Government backing, is up in arms against the Indian Government for cancellation of the Licence.

The Company,backed by Indo-Soviet Bilateral Treaty is planning to go for international arbitration.

The outcome is yet to be known.

What is relevant is the fact that can a Government renege its contractual obligations because its Ministers have engaged in corrupt practices?

If that were to be so, any one can file a case and the case may drag on and if the verdict is that there were irregularities involved, will the transaction become null and void?( we may not like it;the fact is that every Major Contract is won by Corrupt practices)

Under these circumstances, what is the sanctity of the Government saigning a Contract?

Similar instance was witnessed in Antrix-Devas scam which involved ISRO Transponder sale.

Antrix threatened to go to Court as the Government cancelled the Deal( nothing was heard of thence).Telenor and Etisalat are also thinking on these lines- to go for International Arbitration.

(Telenor and Etisalat have announced quitting India).

I feel that they are right.

While the culpability remains with the Company, it does not warrant cancellation of Licences for fraud and manipulation by a few, both on the Government and the Company’s side.

At best the Companies may be asked to pay a hefty fine.

If the present cancellation of Licences for ‘manipulation and kick backs’, no organisation can do business with the Government as the Manipulation and Bribery is a part of market economy at the Operating Level.

This what the Government means when they say that the fall out of 2 G will affect international investment in India.

I shall blog separately how an International Contract is negotiated in India.

Those who have experience in the dealing with the government are aware of this. (and the Government as well).

”

Russia-based Sistema JSFC, the majority shareholder in Sistema Shyam TeleServices Ltd (SSTL) that operates the MTS brand of mobile phone services, has sent a notice to the Union government invoking the right to protect its investment under a bilateral treaty, the first such challenge by an overseas company following the cancellation of 122 licences by the Supreme Court on 2 February.

Apart from using the provisions of the bilateral investments treaty (BIT) between India and Russia to move against the government, “the company also plans to contest the Supreme Court order by filing a review petition within this week”, Vsevolod Rozanov, president and chief executive officer of SSTL, said in an emailed statement.

One of Russia’s largest conglomerates, Sistema has a 56.68% stake in SSTL, which had 21 of its 22 licences cancelled. It has proposed, in the notice to the government, “to settle the dispute in an amicable way within six months (by 28 August). A copy of the letter has also been sent to the Indian embassy in Moscow”, the company said.

 

The India-Russia BIT allows a private investor to initiate dispute arbitration proceedings against the government, said Anuradha R.V., partner at Clarus Law Associates.

“The key question before the arbitral tribunal…would be whether the effect of the Supreme Court verdict amounts to a violation by the government of India of the rights of an investor from Russia under the BIT,” she said. “The defence of the government in such a case would need to be carefully articulated under the provisions of the BIT, to the effect that the Supreme Court ruling does not amount to an ‘expropriation’, or an action equivalent to expropriation as defined under the BIT.”

Sistema has invoked clause 9.1 of the BIT, which was signed on 23 December 1994 and came into force on 5 August 1996. If the dispute was not settled within six months, it “reserves the right to commence proceedings against India before an international arbitration tribunal set up in accordance with the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL) and/or in any other available forum”, the company said.

If a verdict over the dispute goes against the government, Sistema may have to be compensated for losses on its investment in India, Anuradha said. However, such bilateral pacts typically don’t contain a provision to impose a penalty that’s over and above such compensation”

http://www.livemint.com/2012/02/29003022/2G-Licences–Sistema-sends-no.html

Related articles

• Telenor CEO threatens to quit India after licence revoked (fiercewireless.com)