DNA Edit: A BIT of trouble

After a special CBI court gave a clean chit to former telecom minister A Raja, many came to harbour the notion that the 2G scam has been given, if not appropriate, then at least, a logical closure. However, the fallouts from the case are far from contained and the repercussions following from the Supreme Court’s momentous decision to cancel 122 telecom licences in 2012 are still being felt deeply by the Indian exchequer. Reports indicate that businessman and owner of STel C Sivasankaran will be moving the SC seeking compensation for the loss of Rs 3,400 crore suffered by him after the SC junked a clutch of licences granted under the UPA regime. Sivasankaran isn’t the only one planning to beseech the SC for compensation.

Other companies are already pursuing litigation in the Telecom Disputes Settlement and Appellate Tribunal: Videocon Telecom is seeking damages of up to Rs 10,000 crore while Loop is suing the Indian government for Rs 4,000 crore, not to mention the $1.5 billion it is seeking via international arbitration. Apart from these three entities, there are four other joint telecom ventures that have the option of pursuing damages, either in India or via international arbitration or both. Of the four other joint initiatives, Russia’s oil-to-telecom conglomerate Sistema JSFC – the majority stakeholder in the Sistema Shyam Teleservices Limited – has also said that it might take a legal recourse for compensation, subject to the outcome of Videocon’s and Loop’s cases.

Where does this leave the Indian exchequer? Shaking in his boots obviously. Even if the Indian courts are to shoot down the pleas of these companies, they still have a legal recourse in the Bilateral Investment Treaties (BIT). Between 1994 and 2011, India signed 70 BITs under the rubric of a two-pronged strategy: The first aim was to project India as an attractive foreign investment destination, and the second was to fortify these foreign investments from the domestic laws and the glacial pace of judicial resolution. Naturally, the Indian government was bending over backward, yielding more negotiation space in its eagerness to clinch a deal than driving a hard bargain. A watershed moment in India’s BIT agenda transpired in 2011 when an international arbitration tribunal held India guilty of violating commitments embedded in the India-Australia treaty. The next shock came in July 2016, when another arbitral tribunal levied a penalty of $1 billion for annulling the Antrix-Devas deal. Other claims like that of Cairn Energy seeking $5.6 billion in compensation and Vodafone’s claim of $1,400 million are still being litigated.

On the other hand, there exists precious little evidence that these BITs attract FDI into India. Even renowned jurist Fali Nariman has questioned the efficacy of these BITs suggesting that India’s investment cannot be credited to these BITs but to the robust performance of the Indian economy, evidently better than the performance of other developing countries. In any case, India has learnt its lesson. By April this year, BITs with 58 countries were allowed to expire. Going ahead, India will have to take a tougher stand on BITs and ensure that the Indian regulatory and judicial space has the upper hand.