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By: Anirudh Wadhwa and Ashutosh Ray
Bilateral investment treaty arbitration must be made more transparent.
Following the White Industries decision in 2011, the first ever bilateral investment treaty (BIT) award against India, BITs have been in the news. BITs entered between two countries allow investors of one country to initiate investment treaty arbitration (ITA) against the other (host) state if the latter’s measures are not consistent with the investor rights granted under the BIT. Foreign investors who had hitherto ignored India’s BIT obligations have become aware of their rights, and reports indicate that legal notices have been served on the state by various foreign investors threatening ITA.
UNCTAD reports that there are (at least) 12 known ITA claims against India, making it 11th in the list of countries against whom ITA claims have been raised. Late last year, Deutsche Telekom, a German investor in Devas Multimedia, sought damages of over $1.6 billion for the cancelled satellite project between Antrix, ISRO’s marketing arm, and Devas. Clear details are however not available, and the government has not made any disclosures about the case.
This complete lack of transparency relating to ITAs is worrying. The number of claims, the potential liability in issue, the status of the hearings, the results of the awards are all matters where information is available (if at all) only through “reports” in the media. Even the White Industries award, which was delivered in November 2011, was available in the public domain only around February 2012 after being published by a foreign publisher. Similarly, recently a leading financial daily indicated on the basis of “reports” that 17 (and not 12) ITA notices have been served on the government.
The Indian government maintains silence relating to ITAs against it, citing the “confidentiality” of arbitral proceedings. This understanding is misplaced. Confidentiality is no doubt critical for private parties choosing to resolve their purely private disputes through arbitration. However, ITAs implicate different concerns.
First, the conduct and outcome of an ITA is an essentially public activity since it involves the state as a necessary party. Second, ITAs often involve large claims against the state. An average ITA claim is around $350 million, and a state normally wins and loses ITAs in equal measure. To put this in the Indian context, take the number of existing claims against India as 12, and assume that India might lose roughly half. The state’s potential liability would be over $4 billion. That’s enough to sustain a programme to employ 2,00,000 additional primary school teachers for the next 10 years. Third, an ITA award creates liability in international law against the state, and can be used as a precedent against that state by other continued…