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Foreign investors will now view India as an unsafe investment destination, according to representatives of Devas Multimedia that’s been empowered to seize the South Asian nation’s assets overseas following a decade-long dispute. 

Devas, which is seeking $1.5 billion from Prime Minister Narendra Modi’s administration, will continue to confiscate cash generated from some ticket sales overseas by flag carrier Air India Ltd., said Matthew McGill, a partner at Gibson, Dunn & Crutcher that represents several Devas shareholders. The firm has already seized assets worth more than $30 million owned by Air India as well as state-run Airports Authority of India, he said.

Devas was authorized by a Canadian court to seize Indian assets overseas after it won a dispute against New Delhi through international arbitration. The spat dates back to 2011 when state-owned Antrix Corp. invoked force majeure to annul a pact with Devas, which later said the action eroded the value of its multi-million dollar investments. The two sides are now engaged in multiple court cases globally in which Devas seeks the award money while India wants to liquidate the company and investigate an alleged fraud.

“What we’ve seen recently from India is its withdrawal from bilateral investment treaties and its rejection of the international order concerning these kinds of investor-state disputes," McGill said in an interview over Zoom late Tuesday. “That demonstrates powerfully that India is not a safe place to invest for foreign investors at the moment and ultimately this will redound to India’s great detriment."

Requests for comment from representatives of Indian Space Research Organisation, which controls Antrix, as well as Air India and the finance ministry didn’t yield an immediate response. IATA has been served a “third-party garnishment order" on funds it may be holding on behalf of some Indian entities, it said in a statement, declining to comment further as the matter is before courts. 

Bengaluru-based Devas offers satellite-based multimedia services.

India’s loss in the Devas dispute will weigh on Modi’s push to attract foreign investments as he seeks to return Asia’s third-largest economy to a durable growth path amid risks from the pandemic. It adds to India’s growing list of losses in global arbitrations, including tax disputes with Vodafone Group Plc and Cairn Energy Plc that eventually forced Modi to scrap a retrospective tax rule. Air India becoming collateral damage to the dispute could potentially weigh on Tata Group, which is in the process of buying the airline. 

“There’s no question that India’s behavior in this case has dramatically affected how investors perceive India and dramatically influences the willingness of foreign investors to put money to work in India," Jay Newman, a senior adviser to Devas shareholders, said in the same interview. “It’s an extremely negative message for foreign investors because what it draws attention to is the fact that you can make agreement with government of India and if it doesn’t like the agreement not only will it not pay you but it will hound you and accuse you of criminal actions or otherwise harass you rather than respect its contractual and treaty obligations."

Both Air India and AAI challenged the order in Canada on Tuesday, Newman said. A spokesman for AAI Tuesday said it’s taking legal recourse to defend itself. Air India in December stopped selling tickets under the so-called global distribution system that allows travel agents to sell tickets on its flights, the Times of India reported on Tuesday. 

Devas will disclose litigation in other jurisdictions and pursue the assets of Indian state around the world, Newman said. “I think further actions will be equally surprising and unfortunately disturbing for India’s commercial relationships around the world," he said.

This story has been published from a wire agency feed without modifications to the text.

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