Govt loses appeal against Ril-shell arbitration award
IN JANUARY LAST YEAR, AN ARBITRATION TRIBUNAL RULED IN FAVOUR OF THE TWO OIL AND GAS COMPANIES
NEW DELHI: The government has lost its appeal at an English high court against a $111 million arbitration award to Reliance Industries Ltd (RIL) and Shell-owned BG Exploration and Production India Ltd in production sharing contracts concerning the Tapti and Panna-mukta offshore oil fields.
In January last year, an arbitration tribunal ruled in favour of the two oil and gas companies. In its partial final award, the tribunal had awarded around $111 million of the total of $260 million sought by them. The government challenged the award under sections 68 and 69 of the Arbitration Act 1996 of Britain. The court dismissed India’s argument under section 68. India had claimed the tribunal’s failure to apply principles of Indian constitutional law, which caused “substantial injustice”.
“There is no basis to argue that the tribunal failed to deal with them so as to constitute a serious irregularity. In light of that there is no need to consider whether substantial injustice occurred,” said the judgement dated June 9.
The matter dates back to December 2010 when the companies dragged the government to arbitration over cost recovery provisions and profits due to the government among other dues. They sought to raise the limit of cost that could be recovered from the sale of oil and gas before profits are shared with the government.
In October 2016, an arbitration panel issued a final partial award (FPA) upholding the Centre’s view that the profit from the fields should be calculated after deducting the prevailing tax of 33% and not the 50% rate that existed earlier.
The panel also held that the cost recovery is fixed at $545 million in Tapti gas field and $577.5 million in Panna-mukta, turning down the appeal to raise the cost provision by $365 million and $62.5 million in Tapti and Panna-mukta oil and gas fields, respectively.
The government then sought $3.85 billion in dues. The companies then challenged the 2016 verdict before the English high court. The court in April 2018 remitted one of the challenges back to the tribunal for reconsideration.
Queries sent to the ministry of petroleum and natural gas, RIL and Shell remained unanswered till press time.