Antrix-Devas deal: India loses arbitration in Hague

MUMBAI: Indian government may have to shell out over a billion dollars in damages to Bengaluru-based Devas Multimedia, after an international court of arbitration ruled in favour of the company in case related to cancellation of a contract with Antrix Corporation, the commercial arm of Indian Space Research Organisation ( ISRO).

The Permanent Court of Arbitration (PCA) tribunal at The Hague found that the government of India's actions in "annulling a contract between Devas and Antrix and denying Devas commercial use of S-band spectrum constituted an expropriation," Devas said in a statement on Tuesday.

It added PCA agreed that the Indian Government expropriated investments of Devas’ foreign shareholders and acted unfairly and inequitably, thus making it liable to pay financial compensation.

This is not the first time that an international court has ruled against the government in Devas case. Last year, the International Chamber of Commerce’s International Court of Arbitration (ICA) had ruled against Antrix, for "unlawfully terminating" Devas-Antrix agreement in 2011, directing the agency to pay $672 million (over Rs 4,400 crore) plus an annual interest accruing at 18 per cent post award, till it is paid in full, to Devas Multimedia.

However, after this PCA ruling, Devas will now have to take a decision as to whether or not to enforce this award against ISRO/Government of India. Abhishek Malhotra, managing partner at the law firm TMT Law Practice said, "In the event that Devas decides to enforce this award in Indian Courts, the only defence that ISRO would have is Section 34 of the Arbitration and Conciliation Act, 1996, i.e., to say that this decision is against public policy of India."

He added that ISRO will have to demonstrate that the security-related and conflict of interest issues that led to cancellation of the agreement with Devas were of paramount importance and hence public policy considerations required cancellation thereof.

Accordingly, allowing such an award to be enforced would conflict with public policy considerations. Or it will have to prove that the quantum of damages awarded is inconsistent with Section 73 of Indian Contract Act, 1872, which only allowed for compensatory damages to be awarded.

"Whether Devas wins or loses its enforcement battle, the judgment does have the effect of bringing under cloud India’s efforts to become an appealing destination for ease of doing business," Malhotra added.

Madhavan Nair, former ISRO chief, who was with the Department of Space when the deal was signed, told ANI, "It is all because of the illegal action taken by the UPA 2 government and the Department of Space at the time." He added that procedures were not followed while cancelling the contract.

"The tribunal ruled 60 per cent in favour of India, and 40 per cent against and no amount was determined to be due at this stage on the 40 per cent. That will be the subject of a second phase of the case. which has not yet begun. There is no deadline for the second phase, which will likely last at least a year and perhaps longer," said George Kahale III, partner, Curtis, Mallet- Prevost, Colt & Mosle LLp, a firm that is representing government of India in the dispute. "We are reviewing the options for legal recourse because we believe the entire case, not just 60 per cent, should have been dismissed."

The case dates back to 2005, when Antrix and Devas signed an agreement wherein the latter was to get about 70 MHz of S-band satellite spectrum to provide high-quality telephony and Internet services.