SC grants RIL plea for arbitration in London

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The Supreme Court has allowed the plea of Reliance Industries seeking arbitration in London over its dispute with the Centre on the Panna, Mukta and Tapti oil and gas fields.

A bench of justices S S Nijjar and A K Sikri on Wednesday set aside the Delhi high court order by which it had agreed to hear the government’s plea against the arbitration proceedings in London. It said that the high court committed a ‘jurisdictional error’ in agreeing to hear the government’s plea.

The court said that in the production-sharing co­ntract, Reliance and the ministry of petroleum and natural gas had ‘consciously agreed’ for arbitration in London in case of any dispute. Tapti, Panna and Mukta fields were awarded to a joint unincorporated venture of Reliance Industries and Enron Oil and Gas India in 1994 after biddings.

In 2002, BG Exploration and Production India acquired the share capital of Enron Oil and Gas India. The production-sharing contract was to be operative for a period of 25 years expiring in 2019.

In December 2010, differences arose on issues of payment and reimbursement of royalties, cess and service tax, and conduct of performance audit by the Comptroller and Auditor General of India, following which Reliance invoked foreign arbitration clause.

At the start of the arbitration itself, the government had challenged the arbitrability of the disputes. In December 2009, the arbitral tribunal rejected the Centre’s objection to arbitrability of the disputes.

The government then moved the Delhi HC challenging the arbitral tribunal’s December 2012 order. The government had contended that arbitration should not proceed under foreign laws as the contracts were signed and executed in India and the subject matter of the contract – the Panna, Mukta and Tapti fields – are also in the country.

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