A claim filed against India by White Industries Australia Limited ("White Industries"), an Australian mining company, under the 1999 Bilateral Investment Treaty ("BIT") between India and Australia, has been decided in favour of the Australian company. The claim related to delays in the enforcement by the Indian courts of an ICC arbitration award obtained in 2002 by White Industries against Coal India Limited ("Coal India").
The original ICC proceedings were seated in Paris and were governed by Indian law. White Industries won and applied to the Delhi High Court for enforcement of the 2002 award. Coal India simultaneously applied to the Calcutta High Court to have the award set aside. White Industries challenged the jurisdiction of the Calcutta High Court to entertain the setting-aside application. The court held that it had jurisdiction, despite the arbitration being seated outside of India. That decision is currently on appeal before the Indian Supreme Court and has remained so since 2004.
The key issues raised by White Industries in their claim were that:
- the Indian courts have shown a willingness to engage in broad and protracted review of foreign arbitral awards, contrary to the legitimate expectation of White Industries that India would comply with its obligations under the New York Convention on the Enforcement and Recognition of Foreign Arbitral Awards ("New York Convention"),
- the considerable delay in the court process – both in enforcement and setting aside proceedings - amounted to a denial of justice; and
- India failed to provide investors with an "effective means" for the enforcement of rights, in breach of its obligations under the Australia-India BIT (which obligation was imported from the Kuwait-India BIT pursuant to the Most Favoured Nation clause in the Australia-India BIT).
In response the Indian government's argument was essentially that problems of delay were inherent in the Indian court system and that they should not be held to the same standards as court systems in other jurisdictions.
The award was passed by the Tribunal in November 2011 and has recently been made public. The Tribunal unanimously found in favor of White Industries. The Tribunal accepted White Industries' contention that delays in the court system faced by White Industries in the proceedings initiated to set aside the arbitral award rendered India in breach of the obligation to provide "effective means" for enforcement of rights. However, the Tribunal rejected the contention that the delay in the enforcement proceedings amounted to a breach of the obligation to provide "effective means" for enforcement of rights, among other things, because White Industries had not taken all measures available to prevent such delay. The Tribunal also rejected White Industries reliance on the New York Convention and held that White Industries' should have known the attitude of the Indian judiciary towards implementing the New York Convention, and such knowledge was contrary to White Industries' argument on legitimate expectation. The Tribunal was also sympathetic to the submissions of the Indian government and failed to uphold a denial of justice claim pursued by White Industries.
The Tribunal awarded White Industries the amount due under the 2002 ICC award plus interest. The arbitration was held under UNCITRAL Rules and was seated in London.
This is the first BIT case brought against India since the discontinuance of claims by foreign investors in the Dabhol power project in the mid-2000s. This decision, and its recognition of the ability of delays in the Indian court system to violate BIT obligations, will be of great significance for India in its efforts to attract greater foreign investment. There have also been reports that India intends to exclude investor-state arbitration clauses from future BITs.