Nissan sues India over outstanding dues, seeks more than $770 million
NEW DELHI: Japanese automaker Nissan Motor has begun an international arbitration against India to seek more than $770 million in a dispute over unpaid state incentives, according to a person familiar with the matter and documents reviewed by Reuters.
In a legal notice sent to Prime Minister Narendra Modi last year, Nissan sought payment of incentives due from the Tamil Nadu government as part of a 2008 agreement to set up a car manufacturing plant in the state.
According to the notice, Nissan said repeated requests to state officials for the payment, due in 2015, were overlooked and even a plea by the company’s chairman Carlos Ghosn to Modi in March last year seeking federal assistance did not yield any result.
The notice, sent by Nissan’s lawyers in July 2016, was followed by more than a dozen meetings between federal and state officials and Nissan executives, said the person familiar with the matter, who did not want to be named as the matter is not public.
The federal officials, from several ministries, assured Nissan the payment would be made, and it should not bring a legal case. But, in August, Nissan gave India an ultimatum to appoint an arbitrator, the person said, adding the first arbitration hearing will be in mid-december.
A Nissan spokesman said the company was “committed to working with the government of India toward a resolution”, but did not elaborate.
A senior Tamil Nadu state official said the government hoped to resolve the dispute without having to go to international arbitration. “There is no discrepancy with regard to the amount due, and we are trying hard to resolve the issue,” the official told Reuters.
The Prime Minister’s office did not respond to an email seeking comment.
The case, filed against India for alleged violations of its Comprehensive Economic Partnership Agreement with Japan, is the latest in a string of international arbitration proceedings against the country by investors concerned about issues ranging from retrospective taxation to payments disputes.
There are over 20 cases pending against India, among the highest against any single nation.
The dispute between Nissan and the Tamil Nadu government also shows the challenges that companies face in India, and how local disputes could undermine the Modi government’s efforts to attract foreign investment and create new jobs.
Several automakers, including Ford and Hyundai Motor, have set up production hubs in Tamil Nadu, giving state capital Chennai the nickname— ‘Detroit of South Asia’.
In 2008, when Nissan and global alliance partner, French carmaker Renault, agreed to invest in setting up a car plant in Chennai, the state government promised several incentives including tax refunds.
Over seven years, Nissan and Renault invested ₹6,100 crore ($946 million) and set up a plant with annual production capacity of 480,000 vehicles, which entitled them to receive the incentives in 2015, according to the legal notice.