Devas Versus Antrix: A Failed Deal Landed Indian Government Into Deep Waters?

In what could be termed a setback for the Indian government, Devas Multimedia Private Limited has begun executing the Airport Authority of India's (AAI) assets after the Superior Court of Quebec passed an order in favour of Devas. Until now, Devas has seized assets worth $30 million with the International Air Transport Association (IATA) in Montreal, Canada. However, the mess dates back a decade or more when the commercial arm of the Indian Space Research Organization (ISRO) signed a deal with Devas Multimedia Private Limited in 2005 to lease out two of its commercial satellites to the latter for 12 years at the cost of 167 crores.

Devas had chosen two Geostationary Satellites (GSAT) used to provide internet services. While all went well between the stakeholders for six years, the UPA-led front cancelled the deal among the two in 2011 after allegations of the contract being 'quad pro quo' or a sweetheart deal. The government took the step to keep its name clean after several parties alleged corruption in the agreement. Nonetheless, the government's decision did not go down well with Devas, which had several foreign investors from Mauritius and Germany.

What Did Devas Do?

Therefore, the first step by the company was to approach an international tribunal to seek compensation. The International Chamber of Commerce awarded the firm compensation worth $1.3 billion in 2017. Based on having won the case at a tribunal, Devas moved to the Court of Western District of Washington, which approved the compensation order of the tribunal court.

There are two types of treaties. First and foremost, the Commercial Arbitration among the stakeholders of the agreement ensures that none of the party's resorts t dirty measures for-profit and adhere to the terms and conditions of the contract signed. Secondly, the Investor Arbitration holds the countries responsible for fair play if international deals are being carried out. For instance, if Mauritian investors had put their money in Indian firms, the government could protect them from harassment or discrimination. Both India and Mauritius had signed the Bilateral Investment Treaty (BIT). Moreover, India had also signed a similar with Germany, and Deutsche Telekom from the European country was also an investor to Devas.

Both the commercial and investor arbitration cases were running parallel against the Indian government in several International Courts. Therefore, under the second BIT, in CC/ Devas, the Court held the Indian government responsible for indirect expropriation and violation of fair and equitable (FET), which is standard to any BIT. The Permanent Court of Arbitration awarded compensation of $111 million to Mauritius under the Indo-Mauritian BIT on October 13, 2020.

The three investors, namely CC/Devas Mauritius, Telcom Devas Mauritius and Devas Employees Mauritius Pvt Ltd – had moved the Montreal district court last year for the seizure of assets of the Indian government to enforce an October 13, 2020, order by the United Commission on International Trade Law tribunal for Antrix Corporation to pay $111 million as compensation for the cancellation of a Devas- Antrix satellite deal that was signed in 2005.

What Did The Superior Court Say?

In Canada, the Superior Court of Quebec said that the Airports Authority of India is an organ of the Indian state, which is inseparable from the country and is an 'alter-ego' of India. The judgement authorises Devas to execute AAI's assets in Montreal. However, besides the Montreal Court, the investors had also moved to a Federal Court in the United States, which refused their plea to identify the assets belonging to Antrix in the country. The Federal Court of US for Washington had earlier ordered them to identify the assets belonging to Antrix in Washington and the eastern district of the country called Virginia.

In the official statement of Devas shareholders, senior advisor Jay Newman said, "The action by Devas in Canada is just a start. Additional actions are forthcoming that will underscore that India is an unsafe place to invest in. No foreign investor should invest in a country where the government can ignore its contractual obligations and deploy its law enforcement agencies to harass and intimidate investors… Using government agencies to launch bogus criminal investigations against Devas will be seen around the world for what it is — an Indian government willing to debase the country's reputation by lashing out at its victims rather than paying what it owes them", The Indian Express reported.

For several years now, foreign investors in Devas have been trying to reach several international courts, especially in the US, for permission to identify the assets of ISRO's commercial arm and the Indian government to enforce harsh compensation over the failed deal of 2005 between Antrix and Devas. Earlier, Air India had opposed the investors' move initiated in the US Federal Court in the Southern District of New York to identify the company as an alter-ego of the Indian government.

The International Trade Law Tribunal had awarded $101 million by the Permanent Court of Arbitration in Geneva, $111 million to the Mauritian investors, and $1.3 billion to the Bengaluru-based multimedia firm, Devas. Antrix had appealed to several US Courts after the Federal Court of Washington ordered in favour of Devas. In 2020, the Supreme Court of India ordered the order of the ICC to be kept in abeyance. In 2014, after the NDA government took charge, the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) were tasked to investigate corruption charges against Devas.

Would Air India Suffer The Aftermath?

Moreover, in 2015, the National Law Tribunal had ordered the liquification of Devas after stating that the firm was created fraudulently. While the AAI was termed as the government's alter ego, there were talks of seizing the assets of Air India since was previously a government's entity in the aviation sector. Moreover, now the question arises if any such step would cause loss to the TATAs who have already acquired Air India. Therefore, the straight answer is 'no' because the company has signed an indemnity bond with the Indian government, which states that it would be protected against all such cases involving the government.

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