Although other foreign investors such as Norway's Telenor and Russia's Sistema had threatened to invoke provisions of the bilateral investment treaties to seek arbitration, they refrained from going ahead as they won licences during subsequent auctions.
KHML, which holds 26.9% in Loop that currently runs operations in Mumbai, invoked the international arbitration under a June 2000 agreement signed between Mauritius and India for the Promotion and Protection of Investments. I t said that the Supreme Court had cancelled the licences after finding the department of telecom's (DoT) tendering policy as "seriously flawed and legally untenable" and being "inherently arbitrary".
"No criticism or blame was ascribed to either KHML or Loop by the Supreme Court," KHML said in its notice to the government, while seeking arbitration either in London or Dubai as it nominated Singapore-based individual Francis Xavier SC as its arbitrator. "Despite this, neither adequate or any compensation has been paid to KHML and the spectrum has been subsequently re-bid. This course of conduct amounts to a violation of the treaty," KHML said, while invoking the arbitration under the Rules of the UN Commission on International Trade Law 1976 (UNCITRAL Rules).KHML said Loop had applied for the now-cancelled licences, relying upon the guidelines issued by DoT. It said Loop paid Rs 1,454.9 crore as cash entry fee for 21 circles, apart from performance and other financial guarantees worth Rs 812 crore. "Loop spent a further amount of approximately $140 million towards making the licence operational."
It said the cancellation of the licences meant "significant losses" for Loop and KHML and resulted in "absolute loss of the prospect of future returns on that investment."
As part of a relief, KHML said it should be refunded the $140 million it had invested in Loop, along with an annual 12% interest from the date of receipt of the investment till the date of realization. Also, it sought $1 billion as losses on projected shareholder revenue due to the cancelation of the licences. Further, KHML sought $300 million as loss of market value of the licences, which were re-auctioned by the government at higher prices.
KHML said it is sending the arbitration notice after fulfilling a six-month "cooling off period" wherein it had made a settleme nt offer to the government. "KHML had made a request to settle, at the latest, on February 19 this year and no settlement has been reached either in the following six months or at all."
via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNE7fYVSsMKahYbt57wxkp7MGGDLWg&url=http://timesofindia.indiatimes.com/business/india-business/Khaitan-drags-govt-to-international-arbitration/articleshow/23380139.cms
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