On 30 November 2011, a final award was delivered by the UNCITRAL Tribunal in the bi-lateral investment treaty arbitration between White Industries Australia Limited (White Industries) and the Republic of India ( BIT Award)2. The BIT award arose from the circumstances which followed an earlier ICC arbitration which awarded White Industries $4.08million in a dispute with Coal India arising from the development of a coal mine at Piparwar, India (Original Award).
The Original Award against Coal India was obtained on 27 May 2002. Shortly afterwards, Coal India applied to the Calcutta High Court to have the Original Award set aside under the Indian Arbitration and Conciliation Act 1996 (Set Aside Application). Around the same time (but before it had notice of Coal India's Set Aside Application) White Industries applied to have the Original Award enforced in the High Court at New Delhi (Enforcement Application).
Initially some progress was made in both the Set Aside Application and the Enforcement Application. However, following the lodgement in July 2004 of an appeal by White Industries against the decision of the Appellate Division of the Calcutta High Court rejecting White Industries' application to dismiss the Set Aside Application to the Supreme Court of India, neither the Set Aside Application or Enforcement Action3 progressed to a final hearing despite White Industries' attempts to progress the matter in the court.
By 2011 neither the Set Aside Application nor the Enforcement Application had been determined leading White Industries to commence an arbitration against the Republic of India pursuant to the bilateral investment treaty (BIT) between Australia and India.4 White Industries application was based upon a number of grounds which arose from the judicial delay White Industries continued to experience in obtaining payment pursuant to the Original Award. At the time of the final award in November 2012, still neither the Set Aside Application nor the Enforcement Application had been determined.
Although White Industries was unsuccessful in a number of its arguments, as detailed below, it succeeded in establishing that, by reason of the delays in the Set Aside Application, India was in breach of the BIT because it had failed to provide an effective means for the enforcement of rights. To reach this conclusion the Tribunal made the following key findings:
White industries had made an investment in India for the purpose of the BIT
To be entitled to protection by the BIT (and therefore to give the Tribunal jurisdiction) White Industries was required to have made an "investment" within the definition of investment in article 1 of the BIT. Investment was broadly defined to mean:
"every kind of asset … although not exclusively, includes:
… right to money or any other performance having a financial value contractual or otherwise. "
The Tribunal found that the correct approach to determining whether an investment has been made is to consider the plain ordinary meaning of the words used in the BIT in their context and in light of its object and purpose.
Among other arguments India contended that an investment must meet the Salini test as summarised by Douglas in The International Law of Investment Claims (Cambridge 2009). The Tribunal rejected India's arguments. It said that the definition of investment in the BIT expressly includes 'a right to money or to any performance having financial value' and said that this was exactly what White Industries had under the contract with Coal India. NamelyWhite Industries had a right to money for the performance of its obligations.5 The Tribunal also noted that it is well established that rights arising from contracts may amount to investments for the purpose of many bilateral investment treaties.6
That, by reason of the delay in the determination of the Set Aside Application, India had failed to provide an effective means for the enforcement of rights in breach of the BIT
This finding involved satisfaction of two key elements. First that the BIT contained an obligation to provide an effective means to enforce rights, and secondly that India had failed to meet that obligation because of the judicial delay.
- The BIT between Australia and India did not, in its express words, contain an obligation to provide investors with effective means for enforcement of rights. However, article 4(2) contained a "most favoured nation clause". Based upon this article, White Industries submitted that the BIT incorporated article 4(5) of the Agreement between the Republic of India and the State of Kuwait for the Encouragement and Reciprocal Protection of Investments, 27 November 2001 (India and Kuwait BIT) which provided that India would provide an effective means of asserting claims and enforcing rights with respect to investments. The Tribunal accepted this argument.7
- White Industries submitted that the judicial delay in determination of the Set Aside Application and the Enforcement Application breached India's obligation to provide an effective means to enforce its rights. The Tribunal described that the 'effective means' standard required of a host nation at paragraph 11.3.2 and then applied this standard separately to the delay in the Set Aside Application and the delay in Enforcement Application. It rejected the submission that India had failed to provide an effective means for the enforcement of its rights with respect to White Industries' Enforcement Application on the basis that White Industries had failed to take all steps available to it to advance the matter.8 However, the Tribunal found that India had breached its obligation to provide an effective means to enforce rights with respect to Coal India's Set Aside Application. It found that, while in the lower courts the delays were not significant, the Supreme Court of India's failure to hear an appeal for over five years (which created a total period of over nine years to deal with the Set Aside Application) was a failure to provide an effective means to assert claims and enforce rights.9
While not determinative of the arbitration, it is notable in relation to the issue of delay that the Tribunal rejected White Industries’ argument that this judicial delay amount to a denial of natural justice. The Tribunal considered that the delay was not such that it met the stringent test required before judicial delay can amount to a denial of natural justice.10
The incorporation of the obligation to provide an effective means for the assertion of claims and enforcement of rights represents a significant issue for India with respect to its bi-lateral investment treaties given the issues that caused the judicial delay in the White Industries case may not alter for some time. This award shows the potential ramifications for states, such as India, entering BITs if their legal systems are not able to provide efficient means to enforce rights or awards either by reason of judicial delay or by other causes. It also offers investors in such countries some level of hope (assuming there is either an express requirement in the applicable bilateral investment treaty) that despite the difficulties encountered with a local judiciary there may be options to secure the enforcement of rights pursuant to a state's obligations in a bi-lateral investment treaty. Having said this, the investor may still be required to endure significant delays or other hurdles before these options become available.