Antrix- Devas Multimedia Deal

Q Why is it in News ?

A A Canadian court has ordered the seizure of more than $30 million worth of Airport Authority of India’s assets.

Q What is the background ?

A 

• In 2005, Devas Multimedia signed an agreement with Antrix —a commercial arm of the IISRO —to provide multimedia services to mobile users using the leased S-band satellite spectrum to be provided by Antrix.
• In 2011, the UPA-2 government canceled this agreement on the ground that it needed the S-band satellite spectrum for national security and other social purposes.
• This led to arbitration between Antrix and Devas at the International Chambers of Commerce (ICC) and two bilateral investment treaty (BIT) arbitrations. India lost all three disputes.

India’s non-compliance

• AAI and Air India are being targeted because they are Indian public sector entities with overseas assets and serve as a proxy for the government of India.
• The Canada court can do so through the concept of restrictive immunity.
• In the meanwhile, the National Company Law Tribunal (India) ordered the liquidation of Devas Multimedia on the ground that the affairs of the company were being carried on fraudulently.

Q Why did India cancel the deal?

A 

• The scandal first came to light when in 2011, the news reported that there were some irregularities in the agreement between Antrix and Devas.
• They reported the findings of a draft audit report and pointed out discrepancies including financial mismanagement, conflict of interest, non-compliance of rules, and favoritism.
• This revelation came at the heel of the 2G spectrum scam which was condemned for the high level of corruption.

Q How can a Canadian court order the attachment of Indian assets?

A 

• State immunity — a well-established principle of international law — shields a state and its property against legal proceedings in the courts of other countries.
• This covers immunity from both jurisdiction and execution.
• However, there is no international legal instrument in force dealing with state immunity in the municipal legal systems of different countries, which has created an international void.
• Consequently, countries have filled this void through their national legislations and domestic judicial practices on state immunity.
• Typically, prominent jurisdictions such as Canada follow the concept of restrictive immunity (a foreign State is immune only for sovereign functions) and not absolute immunity.

Q How can assets of AAI be seized when the claim is against India?

A 

• In execution proceedings, assets of an entity can be seized if that entity is an alter ego of the State that fails to comply with the arbitral award.
• In other words, if the foreign sovereign exercises such extensive control over the entity, then the presumption that the entity has a separate corporate character is set aside.
• Thus, the Canadian court must have concluded that the Indian government extensively controls AAI.

Q What options does India have?

A 

• The first option is to comply with the two adverse BIT awards. However, it is highly unlikely that India would do so.
• The second option is to challenge this decision in an appellate court in Canada as per Canadian law where India can try proving that the ‘extensive control requirement’ is not met in the case of AAI.
• However, state immunity from execution is purely a procedural hurdle to the enforcement of the BIT award.
• It cannot justify India’s breach of its international law obligations enshrined in the two BITs and the continued failure to comply with the arbitral awards.

Q What are functions of New Space India Limited (NSIL) ?

A 

• It functions under the administrative control of the Department of Space (DOS).
• It aims to commercially exploit the research and development work of ISRO Centres and constituent units of DOS.
• The NSIL would enable Indian Industries to scale up high-technology manufacturing and production base for meeting the growing needs of the Indian space program.
• It would further spur the growth of Indian Industries in the space sector.

Q What is ANTRIX ?

A 

• Antrix Corporation Limited (ACL), Bengaluru is a wholly-owned Government of India Company under the administrative control of the Department of Space.
• It is as a marketing arm of ISRO for promotion and commercial exploitation of space products, technical consultancy services and transfer of technologies developed by ISRO.
• Antrix is engaged in providing Space products and services to international customers worldwide.