Updated: October 30, 2020 8:25:58 am
A federal court in the United States has asked Antrix Corporation, the commercial arm of the Indian Space Research Organization (ISRO), to pay Bengaluru start-up Devas Multimedia Pvt Ltd compensation amounting to $1.2 billion for canceling a January 2005 deal to build and launch two satellites to provide multimedia services via the space band spectrum.
The US federal court for the Western District of Washington on Tuesday confirmed an arbitration award made by the International Court of Commerce on September 14, 2015, in favor of Devas Multimedia — on account of the government cancelling the 2005 satellite deal in February 2011 by citing the need for usage of the S-band spectrum for security communications.
Devas Multimedia, started by a few former ISRO officials and US businessmen, subsequently approached the US federal court for confirmation of the ICC arbitration award in 2018. Last year, the US court had imposed a give-year stay on proceedings to await progress in cases filed over the matter in Indian courts.
On September 17, the US federal court removed the stay on the plea of Devas — to enforce the compensation payment sought from the Indian government over the failed deal — by citing a lack of progress in cases in courts in India.
“The petition to confirm foreign arbitral award, is granted,” US federal court Judge Thomas S Zilly said in an 18-page order issued on Tuesday.
According to the order, “full amount of the award – $562.5 million – together with pre-award simple interest at the rate of three-month USD LIBOR +4%, from February 25, 2011, to the date of the award, September 14, 2015 ($672,791.593.75)” is the compensation that Antrix Corporation has to pay Devas Multimedia for cancellation of the 2005 deal.
In addition, the US court has said that simple interest at the rate of 18 per cent per annum on award amount “from the date of the award”, which is September 14, 2015, “to the date that judgment is entered ($331,787.64 per day)” must be paid by the Central government entity. “Any objections to the amount of the Judgment shall be filed on or before November 3,” the court stated.
In the course of the arguments leading up to the confirmation of the award, Antrix Corporation had contended that it should not be treated as an extension of the Government of India, and that the US court does not have jurisdiction to confirm the arbitration award.
The US federal court, however, ruled that it has jurisdiction in the dispute since Antrix Corporation is a firm belonging to the Government of India. “Antrix has no satellites, satellite launch vehicles, transponders, or electromagnetic spectrum of its own, but rather markets assets owned and controlled by ISRO and DOS [Department of Science]. Most of Antrix’s commercial activities are financed by the Government of India. Much of Antrix’s leadership is appointed by the Government of India,” the US court observed while stating that it has jurisdiction under the US Foreign Sovereign Immunities Act.
The court has also cited extended negotiations and meetings conducted in the US since 2003 leading up to the signing of the 2005 deal as examples of Antrix having the required “minimum contacts” in the US.
It said, “Beginning in the summer of 2003, the former chairman of Antrix and ISRO, Dr Krishnaswamy Kasturirangan, visited Washington DC; while there, he signed a memorandum of understanding with Forge Advisors providing that respondent had a ‘long-term objective’ of building a strategic partnership that leverages Antrix’s satellite & space capabilities to enable new social & commercial applications. After petitioner’s company was established, at least five US citizens served on its board of directors.”
Antrix Corporation also argued that the ICC compensation award was made by a tribunal where it did not have an appointee. The US court, however, ruled that Antrix had failed to appoint an arbitrator despite notices being issued for the launch of the arbitration process.
“The ICC gave respondent three opportunities to appoint its own arbitrator in accordance with the agreement and the ICC Rules, and Respondent never did so. The court also notes that, although the respondent challenged the ICC’s jurisdiction to arbitrate the dispute, it never specifically challenged the ICC’s appointment of former Supreme Court Chief Justice Dr. A S Anand on its behalf,” the US federal court said.
Antrix also argued that confirmation of the arbitration award would violate the sovereignty of India, and that it would go against policies to combat corruption.
The US court acknowledged that actions against foreign states in US courts “raise sensitive issues concerning foreign relations of the United States,” but pointed out that it alone cannot override “federal policy in favor of arbitral dispute resolution,” which applies “with special force in the field of international commerce”.
On the corruption issue, the US court pointed out that Antrix Corporation did not argue, “let alone cite any facts showing that the Agreement was the product of corruption or that respondent annulled the agreement on that basis”.
CBI, ED case against Devas, ISRO ex-officials in India
The case filed in the US by Devas Multimedia for confirmation of the compensation awarded by the ICC tribunal was conducted even as the CBI and the Directorate of Enforcement (ED) are pursuing cases against the company and former ISRO officials in India over alleged irregularities in the 2005 deal.
The January 28, 2005, Devas Multimedia-Antrix Corporation agreement was annulled by the UPA government in February 2011 in the backdrop of the 2G scam in the telecom sector and allegations of a sweetheart deal in the allocation of S-band spectrum to a fledgling firm.
“The agreement was essentially doomed from the start given the competing and growing requirements of the GOI to use the nation’s limited S-Band spectrum for military and national security purposes,” Antrix said in arguments in the US court.
Under the 2005 deal ISRO was supposed to lease two communication satellites for 12 years at a cost of Rs 167 crore to Devas Multimedia. The start-up firm was to provide multimedia services to mobile platforms in India using the space band or S-band spectrum transponders on ISRO’s GSAT 6 and 6A satellites built at a cost of Rs 766 crore by ISRO.
After the NDA government came to power in 2014, the CBI was asked to investigate the 2005 deal. In August 2016, the CBI filed a chargesheet against eight officials from Devas, ISRO and Antrix linked to the 2005 deal for “being party to a criminal conspiracy with an intent to cause undue gain to themselves or others by abusing official positions”. Among the eight chargesheeted by CBI in the case is former ISRO chairman G Madhavan Nair.
The CBI has accused former ISRO officials and Devas of causing a loss of approximately Rs 578 crore to the Indian government through the 2005 deal. The ED, under the Finance Ministry, has filed a chargesheet under the Prevention of Money Laundering Act against a former managing director of Antrix Corporation and five Devas Multimedia officials.
The ED has stated that Devas transferred 85 per cent of the Rs 579 crore foreign funding it received on the back of the 2005 ISRO deal to the US under various claims.
Devas Multimedia was started by a group of former ISRO and World Space employees in 2004. The foundation for the deal was laid during a 2003 visit to the US by ISRO and government officials.
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