Why has a Canadian court ordered the confiscation of AAI’s assets worth over $30 million? 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 S-band satellite spectrum on lease provided by Antrix. For. In 2011, the UPA-II government canceled the agreement on the grounds that it needed S-band satellite spectrum for national security and other social purposes. This abrupt cancellation led to three legal disputes – a commercial arbitration between Antrix and Dewas Multimedia in the International Chamber of Commerce (ICC), and two bilateral investments brought by Mauritian investors in Dewas Multimedia under the India-Mauritius BIT. Treaty (BIT) arbitration. ,CC/Dewas Tribunal) and by Deutsche Telekom – a German company – under India Germany BIT (DT TribunalIndia lost in all three disputes.
Summary
- In 2005, Devas Multimedia signed a deal with Antrix which was canceled in 2011. This abrupt deletion led to an arbitration between Antrix and Devas Multimedia and two BIT arbitrations in the ICC. India lost in all three disputes.
- In view of India’s non-compliance, the foreign shareholders of Dewas initiated several proceedings against India and were able to obtain a favorable order from a Canadian court. The Canadian court can do this through the concept of restrictive immunity.
- A Canadian court can order confiscation of AAI assets as India exercises extensive control over the entity making AAI an extension of itself.
The ICC tribunal ordered Antrix to pay $562.5 million plus interest in damages to Devas for wrongfully denying the contract. A US court in late 2020 upheld a 2015 commercial arbitrator award in Dewas’ favor, rejecting all of Antrix’s arguments. CC/Dewas And this dt The tribunal ordered India to pay over $160 million in accrued interest to foreign shareholders of Dewas and $132 million in damages to Deutsche Telekom. Meanwhile, the National Company Law Tribunal last year, on a case filed by the Government of India, ordered the winding up of Dewas Multimedia on the grounds that the company’s affairs were being pursued fraudulently.
In view of India’s non-compliance, the foreign shareholders of Dewas initiated several attachment proceedings against India to recover the money ordered in several courts. CC/Dewas The tribunal has succeeded in getting a favorable order from a Canadian court in this regard.
How can a Canadian court order the attachment of Indian properties, ignoring state exemptions?
State immunity – a well-established principle of international law – shields a state and its property against legal proceedings in the courts of other countries. It includes immunity from both jurisdiction and execution. However, the municipal legal systems of various countries have no international legal instrument to deal with state immunity, which has created an international void. As a result, countries have filled this void through their national laws and domestic judicial practices on state immunity.
Typically, major jurisdictions such as Canada follow the concept of restrictive immunity (a foreign state is only immune to sovereign actions) and not absolute immunity (total immunity from all legal proceedings in a foreign court). In the context of the execution of BIT awards, this implies that state assets serving sovereign functions (diplomatic mission buildings, central bank assets, etc.) cannot be attached. However, assets serving commercial functions are available for confiscation. Since AAI assets are used for commercial, not sovereign, activity, under the Canadian State Defense Act RSC 1985 (CSIA), they can be attached.
How can the assets of AAI be attached when the claim is against India?
In execution proceedings, the property of an entity may be confiscated if that entity is a alter ego of the State which fails to comply with the arbitral award. In other words, if the foreign sovereign exercises such extensive control over the entity, the assumption that the entity has a distinct corporate character is set aside. Thus, the Canadian court would have concluded that the Indian government comprehensively controls the AAI.
What are the options for India?
The first option is to comply with two unfavorable BIT awards. However, there is little chance that India will do so. The second option is to challenge in accordance with Canadian law in an appellate court in Canada where India can attempt to prove that the ‘comprehensive control requirement’ has not been met in the case of AAI and, thus, does not belong to India. Is alter ego, Nevertheless, it is important to bear in mind, as it was conducted in a case known as Khan vs GuineaThe state’s immunity from execution is purely a procedural impediment to the enforcement of the BIT award. It cannot justify India’s breach of its international law obligations contained in the two BITs and continued failure to comply with arbitral awards.
Prabhas Ranjan is Professor and Vice Dean, Jindal Global Law School, OP Jindal Global University.
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