By Indu Bhan
Mukesh Ambani-led Reliance Industries Ltd received a shot in the arm with the Supreme Court on Wednesday holding that English courts only had the jurisdiction to decide the ongoing arbitration dispute between the company and oil ministry over reimbursement of royalties and taxes in the Panna-Mukta and Tapti (PMT) gas fields.
Besides, it ruled that any final arbitral award can be challenged only in the English courts, but substantive Indian arbitration laws will have to be applied by the foreign courts. The English courts will also look at India public policy while deciding the issues, it added.
Reliance Industries (RIL) and BG Exploration and Production India had approached the apex court for settlement of issues with the government through arbitration in London. However, the ministry of petroleum and natural gas had opposed arbitration proceedings in London saying that the matter should be settled in an Indian court.
There are some eight disputes over the production sharing contract relating to the gas fields on the western coast, discovered in 1992. They involve royalty and taxes, cost recovery limit and removal of arbitrator. Some awards have already been passed by the arbitrator in England.
A bench comprising justices SS Nijjar and AK Sikri quashing the Delhi High Court’s March last year’s order that upheld the government’s stand that the HC has jurisdiction over the matter. While allowing the RIL’s appeal, it said the disputes between it and the Union government over the gasfields will be arbitrated in London. Besides, the arbitration will be according to substantive laws of India. However, the appeals, if any, will also be heard in English courts.
The ministry had moved the HC against the claims of BG Group and RIL for reimbursement of royalties and various taxes in the PMT fields. The government’s petition is still pending before the HC.
It had argued against the foreign tribunal’s award that held the companies’ claim in respect of royalties, cess, service tax and CAG audit as arbitrable.
The international arbitrator in 2012 directed the government to reimburse the companies to the tune of $11,413,172, besides additional cess recovered from them. The arbitral tribunal comprising Christopher Lau SC, Justice B.P. Jeevan Reddy, former Judge of Supreme Court of India and Peter Leaver QC is hearing the matter.
RIL had argued that the parties had agreed that the seat of arbitration would be London and that the Uncitral Rules of 1976 would apply; thus courts in India have no jurisdiction to decide the matter and only courts of England have an exclusive jurisdiction in this regard.
According to the Ambani firm, Part II of the Arbitration and Conciliation Act 1996 does not empower the Indian courts to set aside a foreign arbitral award.
As per the terms of the arbitration agreement the courts of the seat would exercise exclusive supervisory jurisdiction over any arbitration proceedings, and any arbitration proceedings resulting in a foreign award could not be challenged in the Indian courts.
At the time the agreement was entered into, the Foreign Awards (Recognition and Enforcement) Act continued…