Sistema asks why India wants to delay arbitration proceedings

Russian firm’s chairman writes to commerce ministry, NSA seeking clarity on the issue of cancelled 2G licences
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First Published: Mon, Oct 01 2012. 11 59 PM IST
Evtushenkov says there were meetings in July with senior government officials but no progress had been made to find an amicable solution. Photo: Daniel Acker/Bloomberg
Evtushenkov says there were meetings in July with senior government officials but no progress had been made to find an amicable solution. Photo: Daniel Acker/Bloomberg
Updated: Tue, Oct 02 2012. 12 44 AM IST
New Delhi: Vladimir Evtushenkov, chairman of Russia’s JSFC Sistema that has a telecom joint venture in India, has written to national security adviser Shivshankar Menon and commerce minister Anand Sharma, asking why India wants international arbitration proceedings postponed.
The Indian joint venture Sistema Shyam TeleServices Ltd’s licences were cancelled as part of a Supreme Court ruling in February. The government has not been able to offer the Russian firm a suitable solution since, even as the last date for applying to participate in a fresh auction of 2G spectrum is only a few days away.
“The Russian embassy conveyed to us (a request by) the Indian MEA (ministry of external affairs) to postpone our action proceeding...We would like to know what is behind this request to give the right instructions to our lawyers. We also have to keep in mind the date October 19—the deadline when we should make a decision on our participation in the auction,” Evtushenkov wrote in the letters, copies of which Mint has seen.
“I am making this urgent request because we have to have a clear vision where we are now and where we are moving to before the forthcoming meeting of the Russian Indian intergovernmental commission on trade and economic cooperation, to say nothing of the visit of the highest level, which is not far away,” Evtushenkov wrote.
Menon could not be reached.
Sistema owns around 56% in Sistema Shyam and the Russian government holds another 18%. The remaining 26% is held by the Shyam group.
The telco operates CDMA technology-based communications services under the brand name MTS and has more than 15 million subscribers in the country. The company lost 21 of its 22 telecom licences due to the 2 February Supreme Court order that cancelled 122 telecom licences and spectrum allotted to nine companies in January 2008.
Sistema is considered to be one of two affected companies still interested in participating in India’s telecom sector and is likely to participate in the coming auction for 2G spectrum, expected to start on 12 November. The other company is expected to be Norway- based Telenor ASA.
Evtushenkov also pointed to meetings in July with senior government officials, after which no progress had been made to find an amicable solution.
Following the Supreme Court ruling, Sistema threatened to drag the Indian government to an international court on the basis of bilateral investment and trade agreements signed between India and Russia. Similar proceedings are likely to also come from Telenor ASA, which has invested in India via Singapore and is using the India-Singapore trade agreement for arbitration purposes.
Sistema had set a deadline of 28 August to resolve the licence-cancellation issue out of court. Sistema Shyam has filed a curative petition in the Supreme Court, arguing that its licences should be treated differently as it has CDMA spectrum, different from the other companies that have GSM spectrum.
“There are too many things happening at the same time and the government is obviously finding it difficult to respond to everything,” an independent regulatory expert said, requesting anonymity. “The auctions are a priority while the response to the arbitration requires clarity from the law ministry as well. We will have to wait for the IMG (inter-ministerial group) to respond.”
The telco has also said it should be treated differently as it was not even mentioned in the Comptroller and Auditor General of India report that launched what is now referred to as the 2G telecom scam.
The Indian government has formed an IMG to deal with all such cases, but no decisions have been made yet due to differences of opinion on the legal framework under which India should fight the case.
Sistema Shyam has started reducing its expenditure in India, keeping the coming auction in mind.
The company, which has invested almost $4 billion (around Rs.21,120 crore today) in the business so far, is reportedly suffering losses of $1.5 million a day, according to a statement from the company last month.
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First Published: Mon, Oct 01 2012. 11 59 PM IST
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