23/11, 24/11, 25/11, 26/11, 27 /11

JJ{l'ERN ATION AL IN VESTMEN T LAW:

• "Investment" itself has its own meaning and understanding. Investment includes tangible
and intangible investments, Contractual and Administrative Rights.
, Principles of Investment Law:
• Not very easy to formulate because home state and host state have different objectives.
While the home state is looking for expamion of business, cash inflow, lowering costs
for the host state company and enhancing profits for the host state company (so if India
invests in South Africa where there is a subsidiary of Airtel, both Airtel and S.A will earn
profits since the costs of company are minimised and the country gets revenues in terms
of taxes paid by the Indian company.)
• For the host state, they get employment opportunities, welfare, economic development,
increased manufacturing capacity.
• Therefore, multilateral efforts to regulate investment law have not been successful.
• Foreign investment is beneficial to home state. The world is divided into areas, which are
rich in capital, and areas, wnich are not. Capital rich countries are called home state. It is
in nature of capital to more from rich states to d~ficient states.
• Return on Capital: It moves from one country to other to maximize the return on
capital. In other words, 'profit' . So long as any decision increases the RoC, it is good
decision, it doesn't matter the impact it has on other things.
• When capital moves it takes different forms and it moves in different forms. 'Transfer of
Technology / Technology Transfer' is a an important regime which governs the
movement It is particularly important. Also, international trade regime also governs
international investment regimes at times. However, they are different topics.
• With industrialization, we saw movement of capital, which led to colonization, and
sovereignty did not matter. The case,is similar now even if the world has changed. Home
states always compete for better (foreign/ attractive) markets. Host states (where
investment comes) also competes particularly with respect to the technology aspect. US,
China and Europe always compete. China competes both as a host and home state.
• 1940-60: Multilaterism failed and bilateralism prevailed. US had to protect its investors
who had invested in India. US had bilateral treaties for the same.
• Further, India is trying to compete globally for FDI. India also has various states which
compete amongst each other for FDI. Maharashtra, Gujarat have benefited a lot due to
forei~ investment. Such competition and pressure reflect on the law making in
coun~ie~ and states within its states. China\ and India's comparison is deeply misplaced
as India 1s a democracy and china is a communist state.
• Th_ere is a_ rece~t trend that IOs play a huge rule in rai1king different countries. Ease of
doing bus1~ess Is _a very ~opular index. lnLlia is tll'ing to in1prove its score in terms of
ease of doing business with measures like ( :ompanies Act 2013 IBC d lib li ·
M · · , , an era zation.
any mternattonal players state that India must liberalize more A d .
tit · • ' · emocratlc country
some nes gives m to the pressure by fo lcign investors which un·ply that h
· · d N 11 · c anges are
reqwre . orma y 111 a democracy, law and policy instead of investors which t th
pressure. crea e e
 Even In~lian industrialists
d host state. . . . fi
. . 1 . home an . ms of maxmuzmg pro Its
• India is :ilso country which is bot l .1 . stment law JO ter . 1't1'zens W1'th ti .
invest abro:id. A home state will Ioo I' at ' mve axi1nizc bene fiJts for itsb ch I, ·• d h us
and :i host state. looks at mveSrme
. -·nl h w to m, . ns states w hich are ot 1ome :in ost
dilemma between the nuSmatc . I1 of l' ·s pectatlo
• ,
.'

st:ite struggle :is they h:ivc to b aIa'.lce• L,,•erythmg.

Law is havrng. ad ve. rse effects on fore·tgn
• f
\ maior. pro bl em 1s · . that · Envirornnent nd the coun try sees needs to protect . these laws ·
.
mves tm en t. FDiors sec EL as a hurdle . . a feel th at t'tis· important, Fis . see, It as a problem.
EIA ts . a perrecc t example
•• , while activists
. pper are also, problematic. The most classical '
d ster 11tc co ,
Coca Cola in Kerala Ve anta, · b'd m· Bhopal.
. .
example of this conflict ts Uruon ,
. Car I e
investors move to
Ch. v·
ma, Ietnam and
• Labour Law also remams · an ts. · sue.
. Many l includes exp lottatton
· · o f child Iabor. Even
b This issue a so . .
Banladesh for cheaper la our. · d •nsolvency law rematn an issue. FDI policy
. . . cross bor er 1 . .
taxation, Banking and secunties, .. olicy. It is amended 9utte often and it is
tract lon~-term p .
is also very important to at , ,. , 1 ased every year now.
lid . FDI policy ts re e, ,
sector specific. A conso ate , nt which is not contentious. When it comes
. 1 d Foreign Jnvestme ,.
• There is nothing re ate to . will first do due diligence. When I atn told
. on a grassroot 1eve1, 1 I .
to democranc set up •. · ·J· l)' If there are e ecttons and govt. changes it
th Ii ·es I will unrest acco1 tng . . . . ,
about e po ci ·, E ·en states have elections during different periods of
mi ht lead to a different appro:ic 11 · ' · I di · •
g
time No one an be certatn a ou . b t thesl'
. elections. Panchayats
. r? I dtn n a ts also a huge issue.
.
Panchayat objected to th e Coca CO h• bottling plant m l"-era a ue to the extraction iof
ground' water, whi ch ere,ated problems. The type of government structure is a very
import1nt differential. . . . .
• bl . d
These pro ems on • ,:_.;. 't hapnen in countries like China. When
. an approval . taken
ts . on
. .a
centra 11eve l, th ere 1s
·. no problem anrwhere
• else. In India, there are conflict in policies
between center and st1tes.

Principles of Investment Law:

[FI=Foreign Investor, Flent: Foreign Investment]

•
One can sense that these principles affect thl' , ovei;eignty o f the host couotry in a negative way:

1. Principle of International Law:Wheneve r there is a dispute between a Foreign Investor (FI)

and host state; and FI and Investor in the hu~t state, International Law will apply.'!t means that
it won't matter to a large extent what the domestic law states. International Law will apply.

2. Principle of Stabilization of Foreign Investment: It means once the investment come to

the host state, after it comes kindly ensure that the conditions under which the FI decides to
invest in your country must remain same as the decision of investment was taken based on
cert,in policies. The principle is that new changes must not be applied to Fi s retrospectively.
(No retrospective application to existing investment.)

For Example, In India even after elections and if a different ideological party has been elected.
However, parties must try to maintain stability in principle. New changes must ap_ply
r
prospecci,~ely. It is generally n~t. possi~le_ for FI tn _withdraw in_most cas,es _due to the long-term
.,,re of mvesunent. Hence, 1t 1s not 111 mterest of the FI to withdraw. So 111 case of changes by
na, ...
the govt., what choice does FI has?

3. principle of ,Expropriation: A sovereign nation can take actions as per there convenienc~.
}-lowever, if such actions effect-the FI, sovereign nation mus t,. compensatc- the f l;!.with, public
[11oney..Jor the losses caused due to these changes.

;1 state may 110/, dircct!J or i11dirr:cl!J, 11atio11alize or expmpriale foreign private proper!} except for a purpose,
which is i11 the p11blic interest, not dimimi11ato,y, and t{~i1i11st fair co111pe11satio11. Fair co111pe11satio11 nJJISI thbe
based 011 the fair market value of the exprop,iated assets lo h,· dcte1711i11ed i111111ediate!J hejore the ti111e al which e
taking occ11md or the decision to take the asset became p11hlidy k11ow11.

Whenever FI will come to a country, it will affect the sovereign power of the country- MoSr
Flents are related to technology, as better technology is needed to harness natural resources .
.Most cases succeed in which country claims that the changes were in favor of the public.

Bolshevik revolution in Russia led to large-scalenationalization, which led to deprivation of Flent

by state. Similarly, there was a revolution in 1938. In both the cases, it led to a demand in
expropriation but that was not accepted, as there was a revolution.

Decolonization tool place in India due to realization of self-determination. However, the

economic situation by change 0£ rule will riot change immediately. India changed its laws after
colonization such as Company Law and MRTP Act. Our decisions will definitely have
implications on the existing investment. Nehru emphasized on Heavy industries, as India did not
have much manufacturing capacity. Hence, it led to a lot of state investment and also many
industries were built by governments also.

Government came out with FERA. Any company in which there is 40% of more voting power
with FI, it must divest. It means that no FI can hold more that 40% shares in a company in
India. Hence, the divested shares went to the Indian Public. This led to a tussle between Fis and
Indian government. Coca Cola withdrew from India then. Nationalization of sectors leads to
adverse effects on Foreign Investor.

Whe_n_ the ownership rights are taken away from Foreign Investor, it leads to expropriation.
Ad~a.onally, even if the FI is not deprived of their property directly but they face dinunution of
their p~operty rights by state, it is indirect exprop ciation. Unless the change in ownership is in
~ublic mterest, the government must compensate. The common public might lose even if tI1 ere
15 a_ ~avoura_ble policy change. FI was taking advantages before the new policies and the same
policies, whic~1 were_ brought to remove such advanrages might lead to expropriation which leads
to ~01,npensatJ~n b~tng awarded to the investor from public money. Hence, before and after new
polic) the public might lose every time due to the principle.
I
Mandatory legal transfer of the tit! e-expropnatlon
- • •

Deprivation oLan investlnent/ di.tnu1utJ011

· · o f tl1e1.r
. property rights of FI= I n dir·ect expropriation.
. .
I
 nt must treat an Indian . and . Forejgn
4. Principle of N ational Treatment:Indi:ui governme •rnincnt base d on the nat10nality of thL":.
. . 1J~ ' ihc. govc
Investor the same. No discrim1nat1on ortant.
· · I 1·s \'L·ry unp
investor. Most Favoxc<l..Nation JJrincip c · t normally di · .
untries canno ' scruninate
5· Most Favore d N auon , Pr1'nciple·· It rncans that co ,·,,1 favor (sue h as a 1ower custo,.,.,
ne ,, spec " ' .. ,s
between their trading partners. If they granl so meo " 11 h 1'l ·
do the same for a ot er.. attons. India
d
uty rate for one of their products) an d Y'c II have to'th Sri Lanka an d US · Bilater
' aI I nvestrnent
• a BIT with Ncthcrlan ds an d thereafter
enters into · WI untries. MFN Principl e states that ·r
tWO CO '
Treaty facilitates a trade and investment be1ween US and Sri Lanka can also claim those1
• concessions were granted to Netherlands,
certain . nt to only grant concession · to
d' nught wa 0 ne
concessions based on those principles. In ia th r countries might ask for the sarn
d tes that o e e
country. However, MFN treatment man a . . I it can have adverse effects,
d
a vantages. Many countries today question. this pnnctp c as ,

. . . . There is an obligation on the host state to treat

6. Fair and Equitable Treatment Prtnciple. . nambiguous and transparent "n_•
FI f: . I . . . ust be consistent, u ' . 4 ms
s ru.r y and eqwtably. It means It m h t te must ensure due process of I ·
· · I · · · · 1 f bili ation The OS t s a aw
prmc1p e 1s wider than pnnc1p e o sta 2 ' • d SEBI must be autonom
. Fis. The mstttuttons
when treattng . . . sue h as CCI •• RBI an . . ' ous and
. not then they vio
Independent when treating Fis, 1f · Iate this prmctple.

Th ere must transparent Iaws an d m· depe ndent and transparent. institutions must be. established
th rough th ose. UnIess, its
· au tonomous •and there is a dispute . . the host state, the mvestor will
. with
not be treated fairly and the govt. will be favored. The mstttuttons must be able to freely rule
against the government.

What kind of Independence?

In Vodafone case, tax laws were slapped on Vodafone retrospectively as they thought that
transactions, which took place abroad, must be taxed in India as they had implications on assets
in India. BHC sided with the government and Vodafone appealed and SC felt that it must side
with Vodafone otherwise it will be death of foreign capital investment in India (remark by
judge).

• SC felt that govt. did not have the requirl·d regulatory laws at the time of transactions and if
the govt. was so concerned it must have enacted the required laws.
• Mauritius was involved and India's trean and double taxation was also in problem. The SC
stated that the govt. has created a situation where the foreign companies are forced to
transact outside. However, if the tax authorities now feel that they Jost on taxation, they can't
apply the laws retrospectively.

8. Full protection and Security Principle:!£ FI establishes a factory; the factory will be
efficient only when it is not raided by local gllons and it is a safe place to work. While addressing
dispute redressal, protection comes into picture.

Case: Vodafone not only filed cases in BHC: and SC, it also pursued other measures. Even th e
st
Home ate plays a role here. When Manmohan Singh visited UK, British PM expressed that
Vodafone ~s b~ing treated unfairly and India's treatment is causing damage to India's image
before foreign mvestors. Manmohan Singh stated t<, the UK PM that India will treat India fairly.
At that time, the Finance minister (Pranab Mukherjee) felt that India must act in its sovereign
power to prevent a huge loss in tax revenue. However, SOM committee was constituted by
chindambram was Mukherjee became president and this saved Vodafone. The international
relations between home and host state also m~ttcr. It is in this context; even diplomatic
protection must be analyzed. Negotiation, conciliation and arb is an alternative if the
abovementioned measures fail.

When it comes to arbitration there are two typed: :\d hoc and Institutional. Ad Hoc arbitration
.
might be better in terms of leverage for host st1te. Institutionalized is more structured and host
states generally don't benefit host states. India is yet to become part of ICSID. Justification for
bypassing domestic resolution system with respect to disputes is that it is not efficient and
effective.

A multilateral framework is needed to regulate Fls. In international trade law such framework
has been largely successful (WfO). Attempts have been made since 40s but the competing
interests of home and host states have become a hurdle for regulating International Investment.
Havana Charter ·1948 and Abs - Shawcross Draft Convention On Investment Abroad 1959
failed at large as they favoured home states. In 40s, the era was that many newly independent
nations wanted to assert their sovereignity and host states were averse to international
regulations. In the 40s new large countries were emerging and they wanted to be self-reliant. UN
Declaration On Permanent Sovereignty Over Natural Resources was used to express each
country's desire with respect to their sovereignty. In New International Economic Order, host
states took position with respect to regulating foreign investment in their own countries. Charter
of Economic Rights & Duties of States 1974 was a part of the same and it ensured that it didn't
matter that whether it was US or UK, each country had their own rights. In UN Draft Code of
Conduct for;fNCS, the host states were calling the shots with respect to Fis. FERA was part of
the same. Such measures were taken through UN as it was truly international (one nation one
vote). However, the draft code was unsuccessful as many Fis (MNCs) were from host states and
they lobbied that the code must be deserted and they succeeded in the early 90s. Multilateral
Investment Guarantee Agreement (MIGA) also c11ne up'during the same time. Guidelines on
Treatment of Foreign Direct Investment 1992 were the last attempt to build a multilateral
dispute redressal system with respect to Interna1:ional Investment Law. When it comes to
International Investment Law, multilateral efforts have not taken as far due to different
competing ideologies throughout the 20' h century. Earlier they tried to assert sovereignty through
UN and now there is an ideological tilt. Multlarcrlaism has not gone very far in terms of
International Investment Law. Flow of capital will continue. Hence, it is now regulated through
BITs. India has entered into BITs with around 86 countries.

Bilateral Investment Treaties

Agreement between two countries setting out the rules in accordance whereof investments made
by the nationals (including companies) of the two state parties in each other's territory are
protected. The abovementioned principles have been incorporated in the BIT.
 INDIA and BITs

1. Dabhol Power Company Case:

E nron Corporation entered into an MolJ \l ' Jt· h Maharashtra State Electricity Board (ivISEB) .
' . in
June ' • 'ficant welcomed relationship
1992. India was liberalizing in 1992 :111 d tt· wa s 'a s1gru ' as 'a
World's leading MNC was entering India.

E~ron established Dabhol Power Company (DPC) ior poB'.V er b generation in Maharashtra.
me the sole purchaser of Enron
h Id soo d 10" ity MSE eca P.2wet
e 1/o whereas GE and Bechtel hel · " equ . · t e that it case MSEB f: il
generated by DPC. Government of Maharn~ I1tra issues· a guaran MSEB)e G a s to
pay, GoM will pay. Additionally if both foll. to pay (G O M and d T overntncnt of Inc!i a
•
Issued
• a counter-guarantee to DPC ' so that Enron ts· protecte . o secure investment' We
generally try to bind state and central government.
0
Verseas Private Investment Corporation • (0 PIC , US government. .agency. created . to promOte
Us
pnvate
· investment
. in developtng. countnes)
. provt'd ed $ .160 million tn fl.l!lding to DPc an d
also entered into political risk insurance contracts to the parties.

New government came to power in Mahamshtm and they made an ~sue that the technology
being used by.DPC was expensive and the power being generated was not.good for the people
as MSEB paid through State exchequer. Hence, the govt. undertook review of DPC. MSEB
directed DPC in August 1995 to 'cease construction and abandon project'. In a way electoral
promise was being fulfilled and they also concluded that the project was too expensive. DPC
commenced international arbitration in London against MSEB. MSEB challenged the
jurisdiction of Arbitration tribunal and "lso filed suit in Bombay High Court. Hence,
negotiations started and they entered into a revised agreement on 23 February 1996 leading IXl
DPC withdrawing arbitration proceedings and MSEB dropping suit. After 18 months of
operation, dispute between MSEB and DPC reemerged with former making defaults in payment
to the latter. MSEB rescinded Power Purchasing Agreement (PPA) with DPC on 23 May 2001.
DPC stated that whatever power they produce, they will not have a buyer. Hence, DPC invoked
counter guarantee of Indian Government but it refused to pay on the ground of it not being
unconditional. Bombay High Court issued injunctions against DPC pursuing arbitration against
Maha,ashtm Government for guarantee. I >clhi High Court issued injunctions against DPC
pursuing arbitration against Indian Governml'nt for counter guarantee claims.

While this was happening, Mauritius based subsidiaries of GE and Bechtel, challenged such
orders and they invoked violations of India--Mauritius BIT. Hence, this paved path for multiple
for arbitrations. However, eventuaMy evcrvthing was settled out of the court. There are
unconfirmed news reports that MoG had to pay Enron.

2. White Industries Case

--
White Industries is an Australian foreign inwstor, which entered into a contract with Coal India
for supply of equipment to and development of a coal mine. In return for such supply, coal
India was supposed to pay approximately A$ 206.G million.
The dispute is regard to entitlement of White I 111 Ius tries to tl1e bonuses if mining reaches a
certain tlueshold and if tl1e threshold is not met th t· n Coal India could levy penalty payments on
white industries. Arbitration was opted to solve thl' dispute and majority award was in favor of
White Industries. Justice Reddy Dissented. Majoril l' of the arbitrators held that White Industries
entitled to award of A$ 4.08 million.

Coal India Challenged its enforceability on 6 September 2002. Coal India approached Calcutta
High Court to set aside award under Indian Arbitr:1 tion and Conciliation Act.J'l 996.

White Industries Filed a eEition for enforceme111 of the award on11 September 2002. White
Industries approached Delhi High Court to enforce the same. However, white industries was not
aware that Coal India has approached CHC. Then: was another appeal in CHC and DHC was
also involved. Eventually White fndustries approached SC. Two judge bench referred it to three
judge bench 2008. (Material Sent for deeper facts.)

· White industries felt that the matter would be dela l"ed so it entered into another arbitration for
enforcement in India with respect to that delay. Tribunal held that there is no delay in set aside
application. However, the tribunal felt that there was delay in inability of Supreme Court to hear
the jurisdictional claim. Hence, a huge compensation was granted.

India-Kuwait BIT was relied through MFN provision in India-Australia BIT and white
industries took advantage of the provision in India-Kuwait BIT. Here there was a huge lesson to
be learnt with respect to MFN classes. ---

Interesting dimension is that delay is something wltich has been happening in India because of
technicalities in £:aw. So, based on BITs foreign in\·cstors can go abroad for enforcement but a
domestic investor cannot. Generally, when foreign investor goes abroad due to delay, the get
awards in their favor. Hence, the government is under pressure to prevent the delay to stop Fls
from taking advantage of the delay in India.

Telenor & Sistema sought compensation: We han seen two companies which gave notices to
India at the time of 2G-spectrum case as Supreme Court set aside the contracts which it felt
were arbitrarily awarded. The companies felt that why should they suffer because of
discrepancies in a process as they followed the sam<.: with trust. Vodafone, Nokia, Cairn Energy
and Vedanta had also issued notices to govt. with respect to delay in different situations.

Model BIT

• As a govt. it cannot have multiple claims based nn their BITs. Hence, they reviews them and
they drafted a new Model BIT. The same draft was also sent to the Law Commission of
India. The govt. did away with all other existing BI:fs and they stated that this model BIT
would be a template.
• Hybrid asset-based and enterprise-based definition were incuded under the definition of
'investment'. It excludes several items from the definition of 'investment',
• When it comes to expropriation or nationalization, the government stated that it can do so
keeping three principles in mind:
 (D for public purpose;

(u)
.. tn . tl1e, d uc-pro
. accordance w1tl1 · of l:1w and
. . ccss

(iii) on pnymen t.,o f 'ndequntc co mpcn snti,. ' 11 ' • b h

•
. which. !so be taken y. t e government and
There non-discriminntory rcgulntory nct10rn1,_ . . can
atorya regulatory actlons are d esigned
. and
. .
these, are not part of 'expropnntlon ·' N on d1scrlITUll, bl. h 1th c
b. tives such as "pu lc ea , saiety and the
applied to protect legitimate pu bl1c
. w elfa' re o )CC

environment".
. , · . , c1ause. It was absent
d secunty . . from the initial draft
• lhe BIT introduced a full protecMn ,n · C However, it was still ltlcuded.
nd
and the same was also not rccomme ed by LI ·
Th xperience with white industries.
<l MEN I e ba~cd on our e.
• The tnodel BIT
th exclude _ c ,us ' The Model BIT is no longer self-judging_ Seif
• ere are o er aspects as we · 11 For example.
· d . ill be the one w h.tc h eva Ii_,
uates it N
· · ·11 k measures an it w · ow,
Judgmg tneans tl,ar , state Wl " e '· , defense related to the tneasure t k
the arbitrn] tribunal will be able to evalu,i e the govt. s ' ' en
by the government. T d th · h
• There are certain general exceptions provi .
. •ded in the BI an ese categones ave been
narrowed. Article 32 of tl,e BIT states the exceptions:

Article 32-

'(~ protect public morals or maintaining public order;

(ii) protect human, animal or plant life or health;

ensure
(iii)this
of compliance with law and regulations
Agreement; that are not inconsistent with the provisions

(iv) protect and conserve the envirnmnen~ including all living and nonliving natum]
resources;

(v) protect national treasure, or mOnumcnts of artistic, cultural, histotic or archaeological

value'.

There is another important chapter. ln,-cstor Obligations Article 11, titled as 'Compliance
with laws'. It means that investor is obligated to follow laws of the Host countries.

• The dispute
fuctional redressal
terms from thesystem in DI.
view of Model ll[T Ls complex and sequenti.nl. It is complex in

L The FI needs to submit his claim to domcsric courts within one year of the breach. Only when
domestic remedies are unavailable, a FI can g(, out.

2. The FI_needs to exhaust his local mnedic, for a period of five years. In this entire 5 years is
too much, the FI will be suffering losses. '

3. After 5 years, Fl needs to submit a notice of dispute (to govt and parties) and then the party
r
needs to again for six months and they must solve dispute 'amicably'.

4. FI cannot submit a claim after six years of the breach.

5. Not more than 12 months have elapsed from the conclusion of domestic proceedings.

• For FI, the govt. wants to reduce arbitration and it wants disputes to be solved domestically.
It is a cautious dispute resolution process which has been developed after past experience.
• With respect to ISRO's contracts to Fis, India is facing a series of arbitrations (Davos
Award).
• TI1e CSR provision under companies ac.t has been debated a lot in India. In the Model BIT,
it has been stated that the FI must incorporate foreign CSR standards with respect to
environmen~, labor and human right. It is the FI, which makes a choice with respect to
incorporating the international standards. However, these international satandards and
'public purpose ' have not been defined in any BITs. Hence, tribunal can reinterpreted it in
their favor.
• Government of India has also excluded tax disputes from investment arbitration in light of
Vodafone case.

Vodafone Case:

Tax departmsnt lost 120 Billion Rupees and SC quashed the tax department's demand.
Additionallt the rule of depositing 4% interest which cumulatively amounted to 25 billion was
also done away with.

In support of their claim they invoked India-Netherlands J3IT. India stated that tax disputes are
excluded in India-Netherlands Treaty. Vodafone also invoked UK-India BIT, the result for
which came on 2511,September in favor of Vodafone. The principle of Fair and Equitable
treatment principle was interpreted and applied in favor of Vodafone.

What has been global response to Model BIT?

It has not been very beneficial to India as they have introduced a lot of conditions for the
benegfit of the people. Addiditonally, dropping of the MFN clause has also not helped. India
signed with Belrus and Brazil in 2018 and 2020 respectively. Exclusion of Tax disputes continues
to be a big issue as many countries don't want to sign a BIT with that condition. The priciples of
Investment law have been very contentious and there are other P,ressures on Fis as well:

1. There is a rising movementJ or CSR and Socially Responsible Investment (SRI)

2. FI now needs to respond to International issues nT>w also

These pressures might benefit India.

The role of Panchayats wrt to Orissa Mining Corporation v Ministry of Environment &
Forest (Vedanta Case)

Local tribals worshiped Niyamraja on Niyamgiri and Orissa govt. gave permisision to Vedanta to
mine on Niyamgiri. According to FRA, local tribals have been given power to preserve their
culture. Panchayats interfered and th.is ,t,as taken to SC. SC refused to hold niyamraja as integral
part of their culture but asked Orissa to supervise a referendum in the 12 tribal villages.
Unanimously the grntn sabha of loacal village voted against the bauxite mining by Vedanta.
Hence, Vedanta had to withdraw even if it was a huge loss to the state. POSCO also was in a
s~ar situation with respect to mining in tlw same state.India needs to streamline and speed up
th
eir approvals from different ministries espt"cially with respect to environment. Laws should not
be diluted.

CASE: Bhopal Gas Tragedy (from foreign investment perspective)

1)_ Why was such a plant in the ci t.2

-Cities expand through foreign ii1~·estrnent.
-Biggest foreign investment and :i subsidiary of the US company UCC.
2) Who is responsible?
-Arguments in the US court to lift the veil and make UCC liable but the contract
between UCC and UCIL was made in such a manner that UCC was absolved from
all liabilities.
3) Can a "person" be held liable~
-Anderson who was the CEO of the company and went back. Then never came
back. Section 303 of the IPC- Rash and negligent act- bailable offence, bail granted.
Why after a non-executive director?
-He was at Bombay- away from the scenario. Outcome: section 149(2)- no action
against a non-executive director until they know of the wrong that has been caused.
4) Environmental damage-
Review petition that the settlement doesn't have a component of environmental
damage. Petition pending to open the case and enhance the settlement amount.
5) What about contaminated substances?
-Nagpur, Maharashtra, Gujarat govt, German firm- all of them refused to dispose
off the waste. ·
-Government then asked UCC 10 bear the expenditure. They said the settlement
amount was final. UCC was tlll'n acquired by Dove Chemicals. Government asked
Dove to pay for the disposal, Dove refused and said the compensntion has bee~
arrived and no further claims (civil or criminal) allowed.
-Ultimately the cost is borne by the taxpayers. Thus we are not yet equipped to
tackle such matters. Matters werl· shifted to the Indian Courts from the US Courts
as it was believed that Indian Courts had better jurisdiction over the matter, even
though the victims were againsr this decision. Finally, the settlement amount was
extremely low.
1. Korean Steel Giant - Posco couldn't continue in Idnai - Told tribunal that they are
withdrawing the project although Orissa Government had approved.
2. Forest Dwellers Protection Act rniuires that the community at local level Panchayat
will determine their culture and whether any activity will affect their culture. If Panchayat
approves a project, it will start.. If not , SC won't intervene. Niyam Raja culture in Odisha
r

- was a vital part and Vedanta had to withdraw from mining activities. Naveen Pattnaik
was furious but SC said that only Panchaynt will decide.
3. Kanchimada Panchayat was another Panchayat which refused the plant of Coke as it
contaminated the entire ground water. Went to Court - Company withdrew its project.
Thus, even if CG and SG agree to a project, Panchayats can refuse as they are the actual
protectors of environment and culture.

Srikrishna Committee:
• There exist multiple regulators such as RBI, SEBI, IT, FEMA, CCI, etc. Hence there is a
need of a supreme legislator. To respect this suggestion, the government decided that if
any conflict arose, the Central Government will be the supreme regulator. At this stage,
there is no requirement to make a separate body.

Subrimanium Committee:
• This committee reviewed 6 environmental l<.:gislations.
• Suggested that we should have a single window for environmental clearance. EPA should
be changed to environmental management.
• Environment has played a hindrance in foreign investment- ease of doing business.
• But MOEF is slow and burdened.