Arbitration panel asks Tata to pay $19 million in damages to Reliance Communication

NEW DELHI: Tata Communications has been directed by the global arbitration tribunal to pay 19 million dollars plus interest as damages over a cable dispute two years ago.

The International Chamber of Commerce (ICC), the global arbitration tribunal, has directed Tata Communications to pay Reliance Communication subsidiary about 19 million dollars plus interest from May 2006 as damages over a cable dispute.

"In the matter of the ICC arbitration proceedings brought by Reliance Globalcom Ltd, formerly known as Flag Telecom, against Tata Communications Ltd, the Tribunal has on August 27, 2008 handed down a final award dealing with the issue of damages," Tata Communications said in a regulatory filing today.

"The tribunal has directed Tata Communications to pay Reliance a sum of approximately 19 million dollars plus interest from May 2006 as damages against the 385 million dollars sum claimed by Reliance," the company said in a BSE filing.



Tata Communications said this was the tribunal's final award in the ICC arbitration proceedings over a dispute regarding Flag Europe Asia (FEA) cable ongoing since 2004. The dispute between the two companies goes back a few years, when FLAG accused the then state-owned Videsh Sanchar Nigam Ltd (VSNL) -- now Tata Communications -- of denying it free access to its cable landing station and thereby having a monopolistic hold on bandwidth prices.

FLAG wanted access for enhancing the capacity of FEA cable system from 10 Gbps to 80 Gbps. However, VSNL said it was not under obligation to grant access under the construction and maintenance agreement. The dispute culminated in FLAG referring the matter to the ICC.

Tata Communications lost its appeal against FLAG (now part of Reliance Globalcom) in April this year and the court held that Tata Com would be ordered to pay the cost of proceedings.

The Court in its April 2008 order stated: ''In connection with determining the amount of cost to be awarded in favour of FLAG, the court will consider the underlying substantive interest of the case.

Both parties indicated during arguments that the underlying substantive interest amounts to about 400 million dollars.