(EAS Sarma)
I understand that Ras Al Khaimah (RAK) has filed an international arbitration case against Govt of AP claiming compensation for the failure on the part of the State Govt and APMDC to deliver adequate quantities of Bauxite for the Alumina Refinery at Makavaripalem in Narsipatnam Division in Visakhapatnam district. The State govt, vide GOMs No. 89 (Ind & Comm) dated 9-12-2020, has rightly constituted a senior official committee to work out the modalities of opposing the arbitration proceedings. I am glad that the committee has a representative from the Union Ministry of Mines.
The State govt should tread cautiously while dealing with this arbitration matter, as arbitration relief once awarded is difficult to contest before the courts. It will be all the more difficult to pursue the matter before an international arbitrator.
I have enclosed here a copy of the MOU entered into by APMDC with RAK in 2008 for your ready reference. Going through the MOU carefully, I find the following provisions that seem to favour the State govt.
The MOU does not provide for arbitration in general and international arbitration in particular. Therefore, RAK cannot invoke any provision of either the Indian Arbitration Act or any international arbitration arrangements. I suggest that the govt gets this aspect examined from the legal point of view and, if possible, contest the international arbitration proceedings before either the High Court or the Supreme Court
As per Clause 1.1 of the MOU, the MOU is subject only to Indian laws.
Article 4 defines the “conditions precedent” to the MOU becoming effective. Since the mining lease itself had been revoked and APMDC which is a party to the MOU had been prevented from taking up mining, one of the primary conditions, namely, its ability to deliver Bauxite, had not been fulfilled. Therefore, it is perhaps valid to say that the MOU had never become effective
The Force Majeure clause has a wide ambit. Even civil unrest, disturbances etc. [Clause 20.1 (b)] are conditions that can be treated as Force Majeure. Another important element of Force Majeure is the one defined in Clause 20.1(h), namely, a government directive that prevented APMDC to move forward. One could therefore invoke the Force Majeure clauses to secure protection for APMDC’s inability to fulfill the MOU.
One of the arguments that can be put forward in contesting arbitration proceedings is by claiming mala fides when the MOU was signed in the first instance. In this connection, I enclose extracts of my letters to the then Chief Minister of AP on the possibility of mala fides that were involved in the arrangement entered into with the foreign company and the possibility of the involvement of senior political leaders. If the State govt can tap whatever information that is available on this from the CBI and the Enforcement Directorate, it may be helpful in contesting the arbitration proceedings effectively.
It is unfortunate that the burden of corruption at the senior levels in the government, both political and administrative, should fall on the common man, as the arbitration proceedings could turn out to be adverse to the State govt, if the government fails to contest the same effectively. By way of abundant caution, I would strongly recommend that the State Govt should institute a quick investigation and fix the responsibility of the concerned so that prosecution proceedings, if necessary, may be launched against them. This will strengthen the hands of the State govt in putting forward the additional ground of mala fides in pursuing the matter. Whoever is guilty of mala fides, in this case, should not be left scot-free, as any such callousness will indirectly burden the taxpayer of the State and the people of AP at large.
If the concerned officers fail to proceed as suggested above, they too will attract the liability of letting the people down and doing a great injustice to the cause of the public interest.
(Text of the letter Dr EAS Sarma has written to Mr. R Karikal Valaven,Spl Chief Secretary,Industries & Mines Dept Govt of AP)