Tribunal rules against govt for cancelling Devas contract with Antrix

• India lost the arbitration case in a Permanent Court of Arbitration (PCA) tribunal based in the Hague over its space marketing PSU Antrix Corp annulling a contract with Bengaluru-based private multimedia firm Devas.
• In 2005, the Indian Space Research Organisation’s (ISRO) commercial arm Antrix Corporation entered into an agreement with Devas to lease out satellite spectrum which the Bangalore-based company could use to provide high-quality telephony and Internet services.
• The deal involved Antrix committing to manufacturing and launching two ISRO satellites and then leasing nearly 70 MHz of S-band satellite spectrum to Devas for a period of 12 years. In return, Devas committed to paying upfront fees of a little over $30 million.
• In 2011 however, a leaked draft audit report noted that there were potentially a number of irregularities in the agreement including conflict of interest, favouritism, financial mismanagement and non-compliance of standard operating procedures.in the same year contract between Devas and ANTRIX was canceled by the government. 
• The Permanent Court of Arbitration (PCA) at The Hague has ruled that the government’s actions in 2011 amounted to expropriation and that in annulling the ISRO-Devas contract, the country has breached treaty commitments to accord fair and equitable treatment to Devas’s foreign investors.
• This the 2nd time such a ruling in an arbitration case has come out in the controversy. Earlier in 2015, an International Chamber of Commerce (ICC) tribunal in 2015 found the cancellation of contract as ‘unlawful’ and awarded Devas damages worth Rs 4400 crore.
• According to PCA’s logic , annulling the contract and denying the commercial use of S-band spectrum, the Indian government has not only damaged the business interests of Devas but also expropriated the investments of the company’s foreign shareholders. So, tribunal believes, that the government is liable to pay financial compensation.

Analysis

• There are two issue regarding the corruption charges on ANTRIX, First is that CAG audit and a number of other panel probes set up by the government have to date not found direct evidence of a quid pro quo between Antrix and Devas. Put simply, there has been no evidence of Devas officials bribing anyone in ISRO or Antrix to have the deal pushed through. The government probes instead point primarily towards procedural lapses and potential conflicts of interest (with many Devas employees being former ISRO scientists).
• Secondly, is the issue of losses; specifically how much money was lost by not auctioning the S-band spectrum. In its audit, the CAG primarily calculates losses (with some of its estimations going as high as Rs 2 lakh crores) in the Antrix-Devas deal by comparing satellite spectrum and terrestrial/telecom spectrum; which, as a few analysts have pointed out, is incorrect.

By: Vishal