Nissan goes arbitration way PDF Print E-mail
Friday, 08 December 2017 07:17
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Sarthak edit



Japanese automaker Nissan Motor Company Ltd joins an increasing list of foreign investors that are trying to get a solution to their problems—vis-a-vis the government—through arbitration courts. Vodafone Plc has announced that hearings in its arbitration case against the Indian government over a Rs 22,000 crore tax demand will commence soon. The UK-based Cairn Energy Plc’s arbitration, against a tax demand, is also in an advanced stage. Japanese telecom major DoCoMo was in an arbitration against the Tata Group to enforce a contract and won the case, but this turned into a confrontation with the government because the it insisted the contract—and hence the arbitration award—was against the law of the land and therefore unenforceable. It was only because the Delhi High Court was quite firm in its ruling that the award had to be enforced.

Among domestic investors, Reliance Industries has several arbitration cases against the government. In each case, the government reaction has been the same, first deny that the issues can be arbitrated and, later, try and delay the arbitration as long as possible. In this case, Nissan is asking for nearly Rs 5,000 crore in unpaid incentives including VAT refunds—the prime minister’s office has been served the notice since it invokes the bilateral investment treaty between Japan and India.

Officials of the Tamil Nadu government, in turn, claim that the incentives were to be spread over a 21-year period—the MoU between Nissan and the state was signed in 2008—and that the company was trying to accelerate the benefits-payout with such pressure tactics. The automaker, along with global alliance partner Renault, had invested Rs 6,100 crore in setting up a plant near Chennai—creating over 40,000 direct and indirect jobs over the last seven years—and argues that the investment subsidy and tax refunds that had been promised to it became due from 2015. After the state government failed to pay the demand, its chairman Carlos Ghosn, had written to Modi in March 2016, but that didn’t help.

While the central government lost a chance to broker a settlement between Tamil Nadu and Nissan, it would do well to cooperate to ensure the arbitration is finished quickly. Things can go wrong even in countries which have much better investment regimes, and India has a long history of not allotting land to projects on time or giving other clearances; indeed, in these cases too, the government must pay investors damages. Till such time that India is able to improve its investment climate, the least it can do is to cooperate in all arbitration cases. At least that will reassure investors that some part of their losses due to bad policy can be recouped.


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