The Government cannot sidestep its obligation under bilateral international treaties (BIT) by saying that the decision to cancel 2G licences was taken by the Supreme Court, according to Lord Goldsmith QC, former Attorney General of UK.
“As a principle, courts are considered to be part of the State under bilateral investment treaties,” Mr Goldsmith told Business Line over a phone call from London.
Mr Goldsmith, considered to be a legal expert in litigations-related bilateral investment treaties, said that protection of investments by foreign players will go a long way in establishing India’s credibility for foreign direct investment.
In February, the Supreme Court had cancelled 2G licences issued on or after January 10, 2008. This included licences given to companies with substantial foreign investments.
Russia’s Sistema and Norway’s Telenor are among the foreign players which have invoked the bilateral treaties signed by India with Russia and Singapore. Sistema has even set a deadline of August 28 to resolve the issue. Both companies have the option to fight the Indian Government in an international tribunal in case the issue is not resolved.
The Department of Telecom had earlier taken a view that the Indian Government was not be held liable under the bilateral treaties signed with various countries because it was the Supreme Court which cancelled the 2G licences. It also said that there was no unfair treatment meted out to foreign players as the court order was equally applicable to Indian companies.
But, according to Mr Goldsmith, foreign players protected under bilateral treaties fall under a different category because the State has an obligation to protect their investments.
“Under BIT, the State promises a particular form of treatment. It will be in India’s interest to uphold the commitments made under BIT because outward investments by Indian companies are also increasing,” Mr Goldsmith said.
Lord Goldsmith served as the UK's Attorney General from 2001-07.
He currently with a private legal company based in London.
He said that there are several instances where Governments have been ordered to pay compensation to foreign players under such bilateral treaties.
For example an arbitral tribunal constituted under the Australia-India bilateral investment treaty has held India to be in breach of its obligations under the BIT and international law to an Australian mining company –White Industries.
In the case of 2G players, there is a view within the Government that Sistema and Telenor should have first exhausted legal options available to them within Indian legal system before invoking the BITs.
But Mr Goldsmith said that generally there is an option for the foreign player to seek redressal from a neutral international tribunal
“The State can rectify the problem by passing suitable legislation or if it can’t then it must pay compensation if a breach is demonstrated. This could be expensive for India,” he said.