International tribunal in The Hague has ruled against Antrix

An international tribunal in The Hague has ruled against the Indian government over the cancellation of a contract between telecommunications firm Devas Multimedia and Antrix Corporation Ltd., in a decision that could cost the Centre billions of dollars in damages.

Background:

In 2005, the Indian Space Research Organisation’s (ISRO) commercial arm Antrix Corporation entered into an agreement with Devas to lease out satellite spectrum which the Bangalore-based company could use to provide high-quality telephony and Internet services. The deal involved Antrix committing to manufacturing and launching two ISRO satellites and then leasing nearly 70 MHz of S-band satellite spectrum to Devas for a period of 12 years. In return, Devas committed to paying upfront fees of a little over $30 million.

• In 2011 however, a leaked draft audit report noted that there were potentially a number of irregularities in the agreement including conflict of interest, favouritism, financial mismanagement and non-compliance of standard operating procedures. While two committees that were set up to investigate the matter didn’t find evidence of a quid pro quo between ISRO and Devas, there were a number of procedural lapses that had apparently taken place.
• Shortly after the controversy exploded, ISRO decided to annul the agreement, with newly appointed space chief K. Radhakrishnan stating that the S-band spectrum was needed for “larger national and strategic purposes”.

Tribunal’s observations:

The Permanent Court of Arbitration (PCA) at The Hague has ruled that the government’s actions in 2011 amounted to expropriation and that in annulling the ISRO-Devas contract, the country has breached treaty commitments to accord fair and equitable treatment to Devas’s foreign investors.

The PCA’s logic is essentially as follows: by annulling the contract and denying the commercial use of S-band spectrum, the Indian government has not only damaged the business interests of Devas but also expropriated the investments of the company’s foreign shareholders. This, the tribunal believes, makes the government liable to pay financial compensation.

About PCA:

The Permanent Court of Arbitration (PCA) is an international organization based in The Hague, the Netherlands. The PCA was created in The Hague by treaty in 1899.

• It is not a court and does not have permanent judges. The PCA is a permanent bureaucracy that assists temporary tribunals to resolve disputes among states (and similar entities), intergovernmental organizations, or even private parties arising out of international agreements.
• The cases span a range of legal issues involving territorial and maritime boundaries, sovereignty, human rights, international investment, and international and regional trade.