By Rakshith Bhallamudi, Associate at T S Suresh & Associates.
At the beginning of 2022, the Apex Court of India upheld a National Company Law Tribunal (NCLT) order that directed the liquidation of Devas Multimedia (“Devas”), an investment company based in Mauritius, on the ground that its incorporation was done with fraudulent intent to draw off funds to dubious foreign accounts. The order basically prevented Devas from enforcing an arbitral award against Antrix Corporation (“Antrix”)- a commercial wing of the Indian Space Research Organisation (ISRO). Following this setback, Devas issued a fresh Arbitration notice to India under the 1998 India-Mauritius Bilateral Investment Treaty (“BIT”), alleging among other things, that it was wrongfully being precluded from enforcing an arbitral award obtained against Antrix. The issue of Judicial expropriations operates under many uncertainties, including the general discord on what even constitutes such. Given that such claims are on the rise, and given the developments in the present case, it is pertinent to reflect on a few questions that further embellish the uncertainties- one, relating to the attributability of Judicial actions/decisions to the State under International Law and subjecting them to a review by an International Investment Arbitral Tribunal (“Tribunal”), and two, to the strength of such a claim before the Tribunal.
Article 12 of the Indian Constitution that defines the State, is an inclusive provision. However, the Apex Court held that the Courts do not come under the ambit of the State in the exercise of their judicial functions, but can attract the definition in the performance of administrative or non-judicial functions. There is also no suggestion in the Constitutional Assembly Debates that the definition extends to Judiciary. However, it is not so simple, as things are made complicated from the international perspective. After all, Arbitral Tribunals in recent years have come to recognize that Domestic Courts could affect expropriations in violation of investment protection standards, as in the cases of Middle East Cement Shipping, Rumeli Telekom, Sistem Muhendislik, DOO Skopje, Tatneft, Garanti Koza, and Saipem cases reflect. Therefore, while Art. 12 may not include the judiciary, at the same time it cannot be ignored that domestic courts would be passive in the firm applications of international norms/rules that may negatively affect the interests of its State, and as it was observed, any “less vigorous” application in order to accommodate the interests of the ‘government’ could call for a State’s international responsibility. It becomes important then, to define what government or state interests mean, especially as being distinct from ‘public interest’ because the current law of the land, as well as Customary international law, could allow for foreign investment expropriation subject to a few conditions including ‘public purpose’ and/or public interest; Art. 6 of the BIT defines expropriation and lays down that for a breach-there must be an expropriation; and that such expropriation should not be for public purposes, without fair compensation or be discriminatory. Now, in the present situation and unfortunately for Devas, the case has severe criminal undertones. These criminal undertones/antecedents not only make it very hard to establish and meet certain thresholds that have been put in place to render the Court’s decisions as being discriminatory but also render it tough to establish that the Award could be considered as a ‘protected investment’ in the first place, as one notes here. Perhaps it would have been more appropriate for NCLT to treat the liquidation proceedings separately without mixing it with the ICC Award proceedings- it could be argued as it was done here- that by mixing the two proceedings, the NCLT may have exceeded its jurisdiction in addition to acting in bias. However, the NCLT’s decision has been affirmed and upheld in multiple stages of litigation, up to the Apex Court, and extending the argument hardly speaks deference owing to the finality of the decision. Therefore, given the facts and circumstances of the present case, there are seemingly no reasons to base the expropriation claims on improper Court conduct as the judicial measure also seems hardly wrongful as a matter of International Law.
While Devas’ expropriation claims may be far-fetched, the case nevertheless provides a good opportunity to offer certain clarifications towards the correlation between denial of justice and judicial expropriations; towards answering whether the legality conditions under Saipem form a part of establishing the unlawfulness of expropriation or merely for a finding of expropriation; towards answering as to the proper role of settled features of typical expropriation in deciding the cases of judicial expropriation; the role of usual lawfulness conditions in determining it; and towards answering the questions of the scope of other International wrongs which are different from denial of justice and/or procedural propriety to decide the illegality/unlawfulness of judicial expropriation.
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