UK fund invokes treaties for CIL loss

MUMBAI: UK-based fund, The Children Investment (TCI) Fund, is invoking the provisions of India-UK and India-Cyprus bilateral treaties to demand compensation from the Indian government for the losses it suffered as a shareholder in Coal India. The Children’s fund, which is the largest shareholder in Coal India after the Indian government, represents the growing trend of foreign investors such as The Chatterjee Group (TCG), Russian telecoms group Sistema and the Norwegian telecom company Telenor, which have invoked bilateral treaties to protect their investments in India over the last few weeks.
TCI has accused the Indian government of breaching several clauses in the treaty, and has asked to enter into negotiations with the fund for compensating it for the losses, failing which TCI has threatened to start arbitration proceedings against the government.
Citing provisions of India-UK and India-Cyprus treaties, Oscar Veldhuijzen, partner, TCI in a letter to finance minister Pranab Mukherjee said, “India’s recent conduct with respect to CIL has seriously impaired the business activities and operations of CIL and has contravened each treaties. We request the Indian government to enter into formal negotiations with TCI seeking the amicable settlement of these claims under the respective treaties. Failing such settlements, within six months, we reserve our rights to initiate arbitration in accordance with provisions of the treaties.”
“Until recently, India was a very safe jurisdiction to invest. But, in the last few years, issues like regulatory uncertainty, delay in justice in Indian courts, delay in permission and clearance from non-judicial authorities, excessive intervention by Indian courts and corruption in government contracts have provided reasons for foreign investors to invoke these BITs (bilateral investment treaties),” said Karan Singh Tyagi, associate M&A & Corporate at the Paris-based law firm Gide Loyrette Nouel. “Most of these proceedings are privileged and confidential. So information on all them is not in the public domain,” said the official with the Paris firm which has earlier advised the Indian government on divestments in NMDC and MOIL.
Akil Hirani, managing partner, Majmudar & Co, told TOI, “International treaties will come into question with India becoming more and more globalised. Going forward, the government will have to be very cautious while making legislations. The government will have to account the interests of international investors while making new laws or changes in existing laws. The government will have to pay for damages if it is not able to prove its case in the international courts.”