Page 10 - AsianOil Week 46

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India’s arbitration issues

scare off investors

POLICY INDIA’S history of oil and gas disputes between
the government and private players has damp-
ened foreign investor enthusiasm for the sector.
Aside from BP, there is not a single international
major developing the country’s oil and gas
resources.
The government has become so bogged
down in high-profile disputes over the years –
involving the likes of BP, Reliance Industries Ltd
(RIL), Cairn Energy, Vedanta and Videocon –
that New Delhi has become desperate to avoid
lengthy arbitration battles.
In 2016, the government introduced a new
premium price for gas produced from new
deepwater fields, with the caveat that companies
could only access it as long as they were not in
arbitration with the state. This prompted BP
and RIL to drop their price-related dispute the
following year, freeing them up to gain access
to attractive pricing for their deepwater KG-D6 and when required without assigning any rea-
block. sons thereof”.
The government then in December 2019
created a panel – comprised of former oil secre- Seeking alternatives
tary G C Chaturvedi, former Oil India Ltd (OIL) While the prospect of a speedy resolution might
CEO Bikash C Bora and Hindalco Industries be tempting at first glance, it is hard to believe
managing director Satish Pai – that could medi- that New Delhi would not try to influence the
ate in upstream disputes. process in its own favour if the chance arose.
It appears, however, that few within the Privately owned Vedanta and Videocon
industry have been convinced of the panel’s mer- Industries scored a major victory in their
its and view the idea of a government-appointed long-running dispute with the Indian govern-
panel ruling on the government’s disputes with a ment over the shallow-water Ravva oil and gas
fair amount of suspicion. field in September. The Supreme Court ruled
that a Malaysia arbitration tribunal’s decision
Undue influence in 2011 to award the partners $476mn in cost
The committee has had very few cases referred to recoveries related to Ravva’s development was
it since its inception, local newswire PTI quoted sound.
unnamed sources as saying on November 15. The judgement brought to end New Delhi’s
They noted that investors were troubled by the battle to have the original arbitration ruling
panel’s inherent conflict of interest issues. overturned, first before the Malaysian High
PTI’s sources said no major dispute had been Court; next was Malaysia’s Court of Appeal and
referred to the panel, as most of these centred then it was the Indian High Court’s turn.
upon contractual interpretations and procedural UK developer Cairn Energy, meanwhile,
issues concerning upstream regulator the Direc- has stated that it is confident that an arbitration
torate General of Hydrocarbons (DGH). The panel will award it $1.4bn in damages against
DGH is a department of the Ministry of Petro- the Indian government in their long-running
leum and Natural Gas and provides secretarial tax dispute. The developer launched arbitration
assistance to the panel of experts. in 2015 after New Delhi froze the company’s
Another major sticking point is that while the local assets the previous year in a bid to enforce
committee is meant to offer speedier resolutions a multi-billion-dollar back-dated tax claim. The
than arbitration or court proceedings, opting to government then liquidated the bulk of the com-
take a case before it also strips parties of their pany’s holdings in the middle of 2018 even as the
right to pursue other alternatives. arbitration process was ongoing.
PTI’s sources objected to the government’s The promise of a quick judgement should be
ability to appoint a dispute resolution panel, call- attractive, but if investors cannot be certain of
ing into question the committee’s neutrality. Fur- the government’s ability not to interfere in the
ther compounding investor concerns is the fact dispute resolution process then it is little wonder
that New Delhi said late last year that it “reserves that they have opted to avoid process in favour of
the right to change the terms and conditions as more obviously independent options.™

P10 www. NEWSBASE .com Week 46 19•November•2020