New Delhi: India can now add a fifth bilateral trade agreement to those already being used to threaten it with international arbitration for problems in its telecom sector.
Almost three years after the department of telecommunications (DoT) withdrew its approval to grant telecom licences to ByCell Telecommunications India Pvt. Ltd, lawyers for the firm’s Switzerland-based majority partner have written to President Pratibha Patil and Prime Minister Manmohan Singh on 18 June on their intent to initiate international arbitration against the Indian government, using the India-Cyprus bilateral trade agreement.
“India has treated ByCell India in a grossly arbitrary and discriminatory manner, contrary to articles. The promoters and Tenoch (Holdings Ltd) intend to prosecute in international arbitration unless India agrees to promptly engage in a constructive dialogue aimed at reaching a mutually agreeable resolution of the investment dispute,” the lawyers said in the letter, reviewed by Mint.
The letter was sent by Gaëtan Verhoosel, partner, Covington and Burling LLP, lawyers representing Maxim Naumchenko and Andrey Polouektov, Russian nationals who jointly hold 100% in the Cyprus-based Tenoch.
Tenoch, in turn, owns a 97% stake in Switzerland-based ByCell Holding AG, which holds 73.79% in ByCell Telecommunications. The remaining stake is held by the Hyderabad-based Jayalakshmi Group.
In July 2009, DoT, in an unprecedented move, withdrew its approval to ByCell on grounds of security concerns.
Apart from Singh and Patil, the letter is addressed to then finance minister Pranab Mukherjee, foreign minister S.M. Krishna, home minister P. Chidambaram, communications minister Kapil Sibal and attorney general G.E. Vahanvati. Four other companies have served notices to the government regarding their investments in the telecom sector.
Sistema JSFC, which holds a 74% stake in Sistema Shyam Teleservices Ltd, a joint venture with the Shyam Group, has threatened to use the bilateral investment promotion and protection agreement between India and Russia.
Telenor Asia has served the government a notice under a trade agreement with Singapore. The Norwegian telco holds 67% in Unitech Wireless Ltd, the other partner being Indian realty firm Unitech Ltd.
Mauritius-based investors of Loop Telecom Pvt. Ltd, Capital Global and Kaif Investment, have served notices under India’s bilateral investment promotion and protection agreements with Mauritius.
The three notices are a consequence of the Supreme Court’s 2 February verdict cancelling 122 telecom licences and spectrum allocated to nine companies in January 2008 following the 2G spectrum allocation scandal.
Separately, Vodafone International Holdings BV, the holding company for Vodafone India Ltd, the country’s third largest operator by subscribers, has served a notice to the government under India’s pact with the Netherlands due to a retrospective amendment to a tax law that could lead to the telco paying the Indian government as much as $4 billion in back-taxes and penalties.
ByCell’s letter also cites the Comptroller and Auditor General of India’s report in November that concluded that 85 of the 122 licences cancelled had been awarded to companies that did not meet the eligibility criteria.
The letter added that “in January 2011, Justice Shivraj Patil found that the DoT systematically violated procedural guidelines so as to unfairly favour specific applicants”, and noted that former communications minister A. Raja was arrested on charges of misusing his ministerial office and of criminal misconduct including bribery. “These investigations and findings show that the licensing process fell far short of the standards required by Indian law and treaties. ByCell India was among those subjected to grossly arbitrary and discriminatory treatment during this licensing process,” it said.