DPC revival efforts receive a jolt

Renewed efforts by the Government of India GoI for the revival of the mothballed Dabhol project have received a major jolt. The US governm...

Renewed efforts by the Government of India GoI for the revival of the mothballed Dabhol project have received a major jolt. The US government 8212; promoted Overseas Private Investment Corporation Opic has initiated arbitration against the Government of India GoI for breach of Investment Incentive Agreement Bilateral Agreement and the recovery of its claims of 110 million.

Opic has paid over 110 million on political risk insurance policies covering the investors GE and Bechtel and Bank of America against the risk expropriation of their investment in the project. Opic has asked the Union government to reimburse these payments or compensate to the fullest extent.

Prime Minister Manmohan Singh, c/o Ministry of External Affairs has been named respondent by Opic in its arbitration notice.

Opic has served the arbitration notice to the GoI under article 3 b of the Bilateral agreement. The arbitration notice has been signed by Mark A Garfinkel and William G Anderson Jr, representing Opic, Mark A Clodfelter representing the Office of International Claims and Investment Disputes of US and the solicitors of Haynes and Boone.

Opic has warned that if the GoI fails to resolve its dispute before December 1, it intends to supplement these claims, by including its losses arising from Opic8217;s direct loan to the project.

Opic, with an exposure of over 190 million with accrued interest and costs is the Dabhol project insurer.

8216;8216;The concerted actions of the Indian government have effectively deprived Dabhol Power Company DPC and its investors and lenders of their fundamental rights, interests, use, benefits and control of their investments in the Dabhol project in violation of the GoI8217;s obligations under public international law,8217;8217; Opic argued.

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Opic8217;s move comes at a time when the Union government has asked the Industrial Development Bank of India IDBI, National Thermal Power Corporation and GAIL India to shell out Rs 500 crore each towards equity for the project8217;s revival.

Curiously, GE and Bechtel, which now hold a total of 85 per cent stake in the beleaguered DPC, have assured cooperation with the government8217;s efforts to re-start the project.

Top government sources said, 8216;8216;The government has received the Opic notice and are examining various legal points.8217;8217;

According to Opic, the actions and omissions of the government, directly and through its subdivisions, agencies and instrumentalities, including Maharashtra government, Maharashtra State Electricity Board MSEB, Maharashtra Electricity Regulatory Commission MERC, Maharashtra Power Development Corporation Limited MPDCL and the Indian courts, had the effect of depriving DPC and its investors and lenders of rights, interests, use, benefits and control of their investments.

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8220;The series of actions or omissions, individually or when viewed cumulatively, destroyed DPC8217;s ability to operate,8217;8217; Opic said.

It claimed that the GoI was responsible under established principles of public international law for the injuries sustained by Opic.