In a major setback to the government, the Supreme Court on Tuesday said Peter Leaver QC would continue as arbitrator on behalf of Reliance Industries (RIL) and its partner BG Exploration and Production in the ongoing arbitration between the two exploration companies and the government over the dispute on reimbursement of royalties and taxes in the Panna, Mukta and Tapti (PMT) gas fields.
A bench consisting of Justices AK Sikri and Rohinton Fali Nariman dismissed the government’s plea asking for the removal of UK-based Leaver. The government cited “lack of impartiality and independence” as its argument, and asked the court to remove Leaver from the arbitration.
At present, the arbitral tribunal consists of Christopher Lau SC (chairman), Peter Leaver QC (nominee arbitrator for RIL and BG) and former SC judge S Sudershan Reddy (nominee arbitrator of the government).
The government apprehended that arbitration proceedings being conducted in unfair and biased manner “would affect the outcome of the proceedings.”
Alleging that Leaver from day one has made it evident by his conduct that his duty was to protect the interests of the private companies in all circumstances, the government had told the court that the members of the arbitral tribunal are under obligation to act fairly and honestly and not as the parties’ representative by reason of having being nominated by a particular party.
The development comes barely a week since the apex court had dismissed ONGC’s plea asking it to relook at the arbitration venue, which was earlier held to be in London.
Seeking clarification of May last year’s judgment with regard to change of juridical seat of the arbitration, ONGC, which operate the PMT field, along with the two private firms, had argued that the apex court had allowed RIL’s plea “on the erroneous basis that there had been an amendment to the production sharing contracts (PSCs) entered into between the parties, and that the juridical seat was shifted to London by consent of the parties.” ONGC claimed that it would be affected as it was not a party to the gas dispute when the issue was decided by SC.
The apex court in May last year while allowing RIL’s plea had held that only British courts had jurisdiction over the ongoing arbitration between the companies and the oil ministry over the former’s demand for reimbursement of royalties and taxes paid by them for the PMT gas fields.
Besides, the top court ruled that any final arbitral award can be challenged only in British courts, but substantive Indian arbitration laws will have to be applied by foreign courts.
The international arbitrator in 2012 said the companies’ claim in respect of royalties, cess, service tax and CAG audit as arbitrable and also directed the government to reimburse them to the tune of $11.4 million, besides “additional cess” recovered from them. The ministry of petroleum had subsequently opposed arbitration proceedings in London, saying the matter should be settled in an Indian court. The government had also in February 2013 filed applications challenging the appointment and continued presence of Leaver and also sought designation of an appropriate “appointing authority.”
Later, the government had called upon RIL and BG to make certain disclosures with regard to connections between their solicitors (M/s Allen & Overy) and Leaver, the government’s petition stated, adding that the companies had said that Leaver was on several occasions engaged by the firm to represent their clients in arbitration.
The ministry had moved the HC against the claims of BG Group and RIL for reimbursement of royalties and various taxes in the PMT fields. RIL and partner BG had originally approached the apex court for settlement of issues with the government through arbitration in London. The SC had quashed the Delhi High Court’s March 2013 order that upheld the government’s stand that the HC has jurisdiction over the matter.
