Big win: Canadian court allows Devas to seize AAI assets in Montreal

In a major win for shareholders of Devas Multimedia, a Canadian court has granted them the right to seize assets belonging the Airports Authority of India (AAI) in Montreal to enforce a $111-million award given by United Nations Commission on International Trade Law.

According to a spokesperson for the shareholders, assets worth $30 million have already been seized, including air navigation and aerodrome charges collected by the International Air Transportation Association (IATA) on behalf of the AAI.

The move also impacts Air India because it uses IATA services to collect money from travel agents in different countries through the global distribution systems. This is the first international court ruling that allows Devas shareholders to collect awards payable by the Government of India for terminating in 2011 an agreement between Devas and India’s commercial space venture Antrix in.

A Quebec court ruled that “AAI is India, insofar as it is an organ of the state of India inseparable from India or is the alter ego of India. As a result, an order from this Court, recognising and declaring the Treaty Awards enforceable in Quebec, can be executed on AAI’s assets. AAI is 100 per cent owned by India and controlled by the Ministry of Civil Aviation, as appears from a report issued by the Ministry of Civil Aviation on January 29, 2021”

The court proceedings in Canada were initiated by Devas shareholders based in Mauritius — CC/Devas (Mauritius) Ltd, Devas Employees Mauritius Private Limited and Telecom Devas Mauritius Limited — against the Republic of India, AAI and the Ministry of Civil Aviation. The shareholders are seeking to enforce the $111-million arbitration award granted to them against India, for terminating its agreement with the satellite company, therefore violating the India-Mauritius Bilateral Investment treaty.

According to Devas shareholders, the Treaty of Awards has been recognised and enforced in multiple jurisdictions including France, Belgium, Luxembourg and the UK. “India has not paid a single cent of what is owed to plaintiffs under the Treaty Awards. To the contrary, India has done everything in its power to evade the Treaty Awards and judgments against it, and plaintiffs have so far received no satisfaction whatsoever,” said Devas shareholders in their application.

Cause for worry: Experts

According to legal experts, the Canadian judgment could be a cause of worry for India, which is fighting a legal battle against Devas shareholders trying to enforce multiple arbitration awards in various jurisdictions globally. Their core strategy is the seizure of assets of Indian PSUs worldwide, by considering them to be the proxies for the Indian state. The government also owes $1.3 billion to Devas, granted to it under the ICC arbitral proceedings in The Hague. This award is being pursued in the US, where the assets of the national carrier Air India are in play.

“This will be a precedent for the seizure of other public sector undertaking assets in multiple geographies. This is obviously a cause of concern for the Indian legal team fighting enforcement across the globe. Since this is an award under a bilateral investment treaty, all assets of the Government of India in any part of the world can be attached and sold for the realisation of the awarded amount." said Atul Sharma, Managing Partner, Link Legal.

“The legal teams for Antrix and the government of India should definitely be worried. These courts are executing the order, which means that it is an extremely valid order in law and they are convinced, otherwise, they would not execute such an order against another sovereign state” added Rahul Kamerkar, Advocate.

An anonymous source close to Antrix maintained, however, that legally the Canadian proceedings cannot create a precedent, especially in a different legal jurisdiction. “Canada is a liberal jurisdiction, not all of them will be the same. In the case of Canada especially, the seizure is being pursued through suspending IATA payments to AAI. IATA will now send the payments to the court in Quebec. In case of direct seizures of PSU assets, the proceedings will be more complex. Moreover, if India is able to overturn enforcement in any jurisdiction that will invalidate enforcement of the awards worldwide.”

Counter appeal

The source also told BusinessLine that the Canadian ruling is an interim order, and is likely to be appealed by the legal team for the GOI and AAI. The counter appeal by India could be heard as early as Tuesday.

However, experts concur that enforcement of the Canadian order will not require ratification from any Indian court, since the ruling has been done on PSU assets based in Canada.

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