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In a setback to New Delhi over annulment of the deal between Antrix Corporation, the commercial arm of Indian Space Research Organisation (ISRO), and Bengaluru-based startup Devas Multimedia, the Permanent Court of Arbitration (PCA) tribunal at the Hague has held the Indian government liable to pay compensation to the tune of 40 per cent of investment made by foreign investors of Devas Multimedia.
The 2005 deal, for the manufacture and launch of two satellites to utilise the S-band or space band spectrum available to the country, was cancelled in 2011.
The Hague tribunal, which addresses disputes in agreements signed under the rules of the United Nations Commission on International Trade Law (UNCITRAL), passed its order Monday.
On Tuesday, the Department of Space (DoS) acknowledged the Hague arbitration court order and stated that the “award of the Tribunal is being examined and legal recourse, as deemed fit, will be taken’’ by the government.
“In the UNCITRAL arbitration between GoI and Mauritius based investors of M/s Devas Multimedia Private Limited, under the Indo-Mauritius BIPA (Bilateral Investment Promotion Agreement), the Arbitral Tribunal have issued their award on jurisdiction and merits on July 25, 2016,’’ the DoS said.
“The Tribunal has said that GoI’s essential security interest provisions of the treaty do apply in this case to an extent. The limited liability of compensation shall be limited to 40 per cent of the value of the investment. The precise quantum has not been determined as yet,’’ the DoS statement said.
The 2005 agreement was annulled by the UPA government in 2011, citing usage of the S-band spectrum for security purposes. The deal was called off via a decision of the Cabinet Committee on Security amid the 2G scandal after questions were raised over S-band spectrum worth crores being handed on a platter to a new firm.
“The Government of India reiterates that it had invoked the essential security interests through a well reasoned, valid and proper CCS decision,’’ the DoS statement said.
In a statement Tuesday, Devas Multimedia said the PCA tribunal “found the Government of India’s actions in annulling a contract between Devas and Antrix Corporation Ltd and denying Devas commercial use of S-band spectrum constituted an expropriation’’.
“With today’s PCA award, two international tribunals have now unanimously agreed that financial compensation should be paid after the annulment of Devas’s rights,” Devas Multimedia Chairman Lawrence Babbio said in the statement.
In September 2015, a tribunal of the International Chamber of Commerce in Paris had awarded Devas Multimedia “damages and pre-award interest totalling USD $672 million’’ and “post-award interest accruing at 18% per annum on that sum until the award is fully paid”.
Antrix Corporation filed an arbitration suit in Bengaluru in November 2015 against the September 2015 order of the ICC arbitration court asking Antrix to pay damages of $672 million to Devas Multimedia for cancelling the 2005 deal to build and launch two satellites.
The arbitration suit filed by Antrix under section 34 of the Arbitration and Conciliation Act 1996 is currently pending before the court of the 27th additional city, civil and sessions court in Bengaluru.
Devas Multimedia was started by a few former ISRO space engineering professionals before big buck investors from around the world poured money into it through the Mauritius route.
Under the 2005 deal signed between ISRO’s Antrix Corporation and Devas Multimedia, the S-band spectrum communication facilitated by two ISRO satellites (GSAT 6 and GSAT 6A) was to be used by Devas for “delivery of video, multimedia and information services to mobile receivers in vehicles and mobile phones’’.
ISRO was to build and launch two satellites, GSAT 6 and 6A, at a cost of Rs 766 crore while Devas Multimedia would pay Rs 167 crore to lease transponders and space spectrum provided by the satellite for a 12-year period.
After the NDA came to power in 2014, the Antrix-Devas deal was handed over to the CBI for investigation. In March 2015, the CBI registered a corruption case against Antrix and Devas officials over the deal. The CBI has said that the deal caused “an alleged loss of Rs 578 crores’’ to the Indian government.
Based on the CBI complaint, the Directorate of Enforcement (ED) also registered a case against Devas Multimedia to investigate the flow of funds in the company under the Foreign Exchange Management Act, 1999 and the Prevention of Money Laundering Act, 2002.
“Other courts in France and the United Kingdom have agreed that the award against Antrix ought to be enforced. We prefer a mutually agreeable resolution of this matter. But until that occurs, Devas and its investors will continue to press their claims before international tribunals and in courts around the world,” Devas Multimedia said in its statement Tuesday.