The dispute between Japanese automaker Nissan Motor and India with respect to incentives of $770 million reportedly due to the company from the Tamil Nadu government has got mired into a bigger legal tangle. While the State government has approached the Madras High Court to restrain the company from proceeding with international arbitration, the latter has moved the International Arbitral Tribunal to forbear the government from proceeding with the case in the High Court.
Justice Anita Sumanth of the Madras High Court on Thursday dubbed “unfortunate” the automaker’s attempt to stall the proceedings pending before her after having accepted notice on the State government’s petition on Monday. The observation was made after Advocate-General Vijay Narayan, representing the State government, accused the company of having “surreptitiously obtained an order from the tribunal at 3 a.m. last night on its application for urgent interim relief.”
In his submissions, Additional Solicitor-General (ASG) G. Rajagopalan urged the court to simply adjourn the case by two weeks for filing a counter-affidavit by the Centre.
“Actually on merits, we are supporting the Government of Tamil Nadu,” he said, and added in the same breath that interference by local courts in international arbitration would have its own ramifications. Acceding to his request, the judge adjourned the case to December 20 for further hearing.
During the course of arguments, Senior counsel P.S. Raman, appearing on behalf of Nissan Motor, denied the allegations of the company having taken any steps to stop the proceedings before the High Court. He pointed out that an urgent interim relief had been sought only against the Centre. However, Mr. Narayan said the company had worded its plea so “cleverly” that a direction was sought against the State government too from conducting the case in the High Court.
He also produced a copy of the order passed by the tribunal comprising Kaj Hober of London, former Chief Justice of India Jagdish Singh Khehar and the presiding arbitrator Jean E. Kalicki from the United States. The order stated that it had been passed under the 2013 Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) and the 2011 Comprehensive Economic Partnership Agreement (CEPA) between Japan and the Republic of India.
It began with an observation that Article 96(21) of the CEPA makes it clear that an international arbitration tribunal constituted under its auspices was empowered to rule on any objections to its jurisdiction and pointed out that in the present dispute, India had raised such an objection by contending that investment disputes would not fall within the competence of the tribunal. Nissan Motor too had agreed to a preliminary hearing to decide the issue of jurisdiction.
It was also decided that a conference call between the parties and the tribunal would be held on December 14 to lay down the procedures and timetable for hearing the issue of jurisdiction. In the meantime, since Nissan Motor apprehended that the case filed by the Tamil Nadu government in the Madras High Court would imperil the arbitration proceedings, the tribunal directed the automaker as well as India to take all necessary steps to ensure that the High Court does not injunct arbitration proceedings at least until the issue of preliminary issue of jurisdiction was resolved.
“The tribunal considers that any injunction by a domestic court, barring a party from pursuing or participating in proceedings otherwise authorised by the CEPA, necessarily would threaten the integrity of the CEPA proceedings. This includes the fundamental right of the parties to a CEPA proceeding to seek a ruling from an international tribunal under Article 96(21) with respect to any objections to jurisdiction.
“Interference with a party’s right to pursue a CEPA arbitration, including the right to obtain a hearing from a CEPA tribunal on threshold jurisdictional issues, by definition would impose harm that is not adequately reparable by an award of damages, within the standard set forth in Article 26(3) of the UNCITRAL Rules. The interlocutory injunction that the Government of Tamil Nadu seeks in the Madras [High] Court proceedings, if granted, would have this effect,” the interim order read.
The Arbitral Tribunal, in its interim order, had pointed out that Nissan Motor had sought for an emergency interim order with two elements. The first was to direct the “Republic of India (including its organs, entities and persons that are attributable to it, which includes the Government of Tamil Nadu) to take all necessary steps to seek a temporary stay of the Madras court proceedings including vacating the hearing on December 7, 2017.”
The second element of the prayer was to order that India (including its organs, entities and persons that are attributable to it which includes the Government of Tamil Nadu) “takes no other action of any kind that might aggravate or further extend the dispute submitted to the Tribunal.” The tribunal, however, refused to accede to the second limb of the prayer by observing that the company “has made no showing of the need for such a broadly worded order.”
It also went on to state: “The relief requested far exceeds the minimum necessary to deal with the present concerns.” In so far as the first limb of the prayer was concerned, the tribunal recorded the submission of India that it had already instructed its ASG to seek an adjournment from the Madras High Court. “The tribunal is grateful for India’s indication that it will seek additional time before any ruling by the Madras High Court on Government of Tamil Nadu’s application for an anti-arbitration injunction.
“At the same time, postponing such a ruling from (potentially) December 7, 2017 to (potentially) a shorter time thereafter does not address the fundamental issue,” it observed and went on to direct Nissan Motor as well as India to take all necessary steps to seek a deferment of any ruling by the High Court at least until the tribunal rules on the issue of jurisdiction.
