Why has a Canadian court ordered the seizure of more than $30 million worth of AAI’s assets? How can a foreign power issue such an order?
The story so far: In 2005, Devas Multimedia signed an agreement with Antrix —a commercial arm of the Indian Space Research Organisation (ISRO) —to provide multimedia services to mobile users using the leased S-band satellite spectrum to be provided by Antrix. In 2011, the UPA-2 government annulled this agreement on the ground that it needed the S-band satellite spectrum for national security and other social purposes. This abrupt annulment led to three legal disputes – a commercial arbitration between Antrix and Devas Multimedia at the International Chambers of Commerce (ICC), and two bilateral investment treaty (BIT) arbitrations brought by the Mauritius investors in Devas Multimedia under the India-Mauritius BIT (CC/Devas tribunal) and by Deutsche Telekom – a German company – under the India Germany BIT (DT tribunal). India lost all three disputes.
- In 2005, Devas Multimedia signed an agreement with Antrix which was annulled in 2011. This abrupt annulment led to a arbitration between Antrix and Devas Multimedia at the ICC and two BIT arbitrations. India lost all three disputes.
- Given India’s non-compliance, the foreign shareholders of Devas initiated multiple proceedings against India and have succeeded in getting a favourable order from a Canadian court. The Canada court can do so through the concept of restrictive immunity.
- The Canadian court can order seizure of AAI assets as India exercises extensive control over the entity making AAI seem like an extension of itself.
The ICC tribunal ordered Antrix to pay $562.5 million-plus interest as damages to Devas for wrongfully repudiating the contract. A U.S. court, in late 2020, dismissing all the contentions of Antrix, confirmed the 2015 commercial arbitral award in favour of Devas. The CC/Devas and the DT tribunals ordered India to pay damages of $160 million plus accrued interest to Devas’ foreign shareholders and $132 million to Deutsche Telekom respectively. In the meanwhile, the National Company Law Tribunal, last year, on a case filed by the Indian government, ordered the liquidation of Devas Multimedia on the ground that the affairs of the company were being carried on fraudulently.
Given India’s non-compliance, the foreign shareholders of Devas initiated multiple attachment proceedings against India in several jurisdictions to recover the money ordered by the CC/Devas tribunal. In this regard, they have succeeded in getting a favourable order from a Canadian court.
How can a Canadian court order the attachment of Indian assets ignoring State immunity?
State immunity — a well-established principle of international law — shields a state and its property against legal proceedings in the courts of other countries. This covers immunity from both jurisdiction and execution. However, there is no international legal instrument in force dealing with state immunity in the municipal legal systems of different countries, which has created an international void. Consequently, countries have filled this void through their national legislations and domestic judicial practices on state immunity.
Typically, prominent jurisdictions such as Canada follow the concept of restrictive immunity (a foreign State is immune only for sovereign functions) and not absolute immunity (total immunity from all legal proceedings in a foreign court). In the context of the execution of BIT awards, it implies that state property serving sovereign functions (diplomatic mission buildings, central bank assets, etc.) cannot be attached. However, properties serving commercial functions are available for seizure. Since the assets of AAI are used for a commercial, not sovereign, activity, under the Canadian State Immunity Act R.S.C 1985 (CSIA), they can be attached.
How can assets of AAI be seized when the claim is against India ?
In execution proceedings, assets of an entity can be seized if that entity is an alter ego of the State that fails to comply with the arbitral award. In other words, if the foreign sovereign exercises such extensive control over the entity, then the presumption that the entity has a separate corporate character is set aside. Thus, the Canadian court must have concluded that the Indian government extensively controls AAI.
What options does India have?
The first option is to comply with the two adverse BIT awards. However, it is highly unlikely that India would do so. The second option is to challenge this decision in an appellate court in Canada as per the Canadian law where India can try proving that the ‘extensive control requirement’ is not met in the case of AAI and thus, it is not India’s alter ego. Nevertheless, it is important to bear in mind, as it was held in a case known as MINE v Guinea, State immunity from execution is purely a procedural hurdle to the enforcement of the BIT award. It cannot justify India’s breach of its international law obligations enshrined in the two BITs and the continued failure to comply with the arbitral awards.
Prabhash Ranjan is Professor and Vice Dean, Jindal Global Law School, O P Jindal Global University.
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