Indian Journal of International Law

https://doi.org/10.1007/s40901-020-00117-w

NOTE

State, courts and energy resources in India: revisiting

permanent sovereignty over natural resources

Nidhi Srivastava

 The Indian Society of International Law 2020

1 Introduction

Modern economic growth is heavily dependent on energy derived from

natural resources, such as coal and oil. Energy resources are not just
important resources economically on account of the revenue they
generate, but serve as an important tool in meeting the development
goals of a nation, especially for providing clean and affordable energy to
all.1 In 2012, United Nations’ then Secretary-General Ban Ki-Moon
stated, ‘‘Energy is the golden thread that connects economic growth, social
equity, and environmental sustainability’’.2 Thus, energy, including energy
resources, have economic, social and environmental significance for
nations across the globe. Governance and regulation of energy has
traditionally been a subject of exclusive domestic competence and
regulation of States. The foundation of this competence is rooted in
1
Sustainable Development Goal 7 aims at ensuring clean and affordable energy for all by the year 2030.
UN General Assembly, Transforming our world : the 2030 Agenda for Sustainable Development, Resolution
adopted on 25 September 2015; A/RES/70/1.
2
UN Secretary-General Ban Ki-moon’s address at the Center for Global Development event on
‘‘Delivering Sustainable Energy for All: Opportunities at Rio?20’’, in Washington, D.C. on 20 April 2012;
SG/SM/14242-DEV/2941-EN/270.

Nidhi Srivastava: PhD Scholar.

Nidhi Srivastava (&)

Energy Studies Programme, School of International Studies, Jawaharlal Nehru University,
New Delhi 110067, India
e-mail: nidhisrivastava.work@gmail.com

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 N. Srivastava

sovereignty of nations over their natural resources, including energy

resources.
Sovereignty is integral to governance of energy, whether globally or
locally, and forms the bedrock for decision-making related to energy.
While there exists a range of international regulations that govern
various facets of energy resources, such as trade, transit, extraction etc,
there is no single international authority on energy, either in terms of
law or institution.3 This can be attributed to the fact that energy is
perceived to be closely linked to sovereignty and states are unwilling to
relinquish their control over energy decisions.4
Over the years, there has been an evolution from territorial
sovereignty to resource sovereignty. The idea of resource sovereignty
emerged in a particular context and was a means to safeguard the
concerns (and natural resource wealth) of newly independent countries
across the world. The notion of sovereignty itself has been changing,
from state-centric to people-centric, or at least people ‘inclusive’,
approach. Many of these concerns and their expression were included
not only in international documents, but domestic constitutions or laws
too. Resource sovereignty formed the explicit or implicit basis for
energy related decisions of states, whether nationalisation, bilateral
agreements or investments. In this context, it is imperative to study
how states have adopted and adapted permanent sovereignty over
natural resources (PSNR) in their own settings. In light of the
importance of energy sector in the economic and development policy
of a country, energy resources offer perspectives into how sovereignty
over resources is exercised by governments in their own right and on
behalf of the people. This paper reviews the developments in energy
resources sector in India, with special reference to the approach of
judiciary. Part I discusses the concept of PSNR in general and its
adoption in international awards and rulings. Part II elucidates upon
Indian state’s ownership and control over energy resources, with special

3
See Alexandra Wawryk, ‘International energy law: an emerging academic discipline’ in P Babie and P
Leadbeter (ed./s), Law as Change: Engaging with the Life and Scholarship of Adrian Bradbrook (University of
Adelaide Press 2014), Ch. 10, pp. 223–255.
4
Catherine Redgwell, ‘Sustainable development of national energy resources: what has international law
got to do with it?’ (2017) 8:1 Journal of Sustainable Development Law and Policy, 378–395.

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State, courts and energy resources in India: revisiting

reference to nationalisation, concessions and contracts. This part

discusses two most important energy resources in the country’s
primary energy mix, coal and oil, which together account for more than
three fourth of total primary energy. Part III elaborates upon the
approach of courts in energy resource related cases, especially in
relation to sovereignty, eminent domain, public trust and common
good.

2 Sovereignty over natural resources in international law

Sovereignty as an international law concept has evolved over time and

has been discussed at length in literature.5,6 This paper does not concern
with any general idea of sovereignty, but only sovereignty over natural
resources. As an international law principle, states, and their people,
have permanent sovereignty over the natural resources located within
their jurisdiction.

2.1 Genesis and context of PSNR

The genesis of the concept of permanent sovereignty over natural

resources (PSNR) can be traced back to 1950s, when the newly
independent states coming out of colonial rule needed some assurance
and confidence that their sovereignty and right to economic self-
determination will not be violated by foreign countries and companies
anymore.7 Initially introduced as a recommendation for concerted
action for economic development of economically less developed
countries,8 PSNR culminated into a resolution adopted by the UN
General Assembly (UNGA) in 1962 after five-year long deliberations

5
https://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e1472
6
For a succinct review on the subject, see Samantha Besson, ‘Sovereignty’ in Max Planck Encyclopedias of
International Law, (Oxford Public International Law 2011), ; For challenges and the need for a new approach,
see 25) John Jackson, ‘Sovereignty – modern: a new approach to an outdated concept’, (2003) 97 American
Journal of Inter- national Law, 782–802, at p. 786.
7
For a detailed discussion on the history and evolution of permanent sovereignty over natural resources
(PSNR), see Nicolas Schrijver, ‘The birth and development of the principle: The UN General Assembly as
midwife’ in Sovereignty over Natural Resources: Balancing Rights and Duties (Cambridge University Press 1997).
8
Concerted Action for Economic Development of Economically Less Developed States, UNGA Res 1515
(XV) (15 December 1960) UN Doc A/RLS/i1515(XV) para 5, cited in Yogesh Tyagi, ‘Permanent Sovereignty
over Natural Resources’ (2015) 4:3 Cambridge Journal of International and Comparative Law, 588–615.

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 N. Srivastava

under the aegis of United Nations.9 These discussions were conducted

primarily during the three sessions of the United Nations Commission
on Permanent Sovereignty over Natural Resources, thirty-second
session of the Economic and Social Council (ECOSOC), and seven-
teenth session of the UN General Assembly.10
Originated as a recommendation from Chile and other Latin
American countries, the demand garnered support from across
continents, albeit from developing countries. Members of the Global
North did not oppose the demand itself, but debated the formulation of
the principle, its relation with existing international law and emphases
therein.11 Besides the UN General Assembly Resolution 1803 of 1962,
PSNR has been reaffirmed in other recent resolutions of UN General
Assembly too. For example, the 2008 Resolution on ‘Strengthening
Transparency in Industries’12 and 2013 Resolution on Transboundary
Aquifers recall the 1964 resolution and recognise permanent sover-
eignty. The context in which PSNR emerged is important as it formed
the basis of demands made by developed and developing countries. The
period was marked by concerns of energy security, import dependence,
deteriorating trade conditions, concerns towards strengthening eco-
nomic independence, protection of foreign investments, and right to
self-determination.13

2.2 Features of PSNR

The concept of PSNR is based on the recognition of ‘‘inalienable right of

all States freely to dispose of their natural wealth and resources in accordance
with their national interests, and on respect for the economic
independence of States’’.14 This right belongs to nations as well as its
people as the General Assembly Resolution of 1962 explicitly states that
right of peoples and nations over natural resources and wealth should
be exercised ‘‘in the interest of their national development and of the

9
United Nations General Assembly resolution 1803 (XVII) of 14 December 1962, ‘Permanent sovereignty
over natural resources’.
10
Karol N Gess, ‘Permanent Sovereignty over Natural Resources: An Analytical Review of the United
Nations Declaration and Its Genesis’ (1964)13:2 The International and Comparative Law Quarterly, 398–449.
11
For a detailed account of various drafts and submissions, see Karol N Gess, (1964), supra note 9
12
United Nations General Assembly Resolution 62/274 ‘Strengthening Transparency in Industries’
Resolution adopted on 11 September 2008.
13
N Schrijver (1997), supra note 6.
14
Preamble to the United Nations General Assembly resolution 1803 (XVII) of 14 December 1962,
‘Permanent sovereignty over natural resources’.

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State, courts and energy resources in India: revisiting

well-being of the people of the State concerned.’’ Thus, nations and

their people are the beneficiaries of this right.
Some of manifestations of this right to freely dispose of wealth
include the right to explore and exploit their resources freely, to use and
manage their resources pursuant to their national goals, including
environmental policy, to have a share in transboundary resources, to
regulate foreign or multinational investment. This right includes the
right to expropriate and nationalise resources, and determine conditions
and compensations for the same. However, as per the UNGA
Resolution, exercise of right to nationalise or expropriate must be
guided by reasons of public utility, security or the national interest. 1962
resolution also affirmed certain existing principles of international
investment law, such as compensation in the event of expropriation of
property, binding nature of investment and arbitration agreements
between states and private parties.15
An important feature of PSNR is that sovereignty is not absolute or
unlimited, but limited by certain duties. These duties relate to disposal
of resources for national development and the well-being of the people,
protection of rights and interests of indigenous people, sharing of
transboundary natural resources, and, importantly, fair treatment of
foreign investors. PSNR takes into account rights of people and nations,
and in the way duties are included, rights of investors too. Whether the
resolution weighs in favour of recognising sovereign rights of states or
enjoining States with duties is debated. Some authors lay emphasis on
the duties and responsibilities aspect of PSNR,16 whereas some scholars
opine that there is little room and recognition for duties in the principle
of PSNR.17
Despite dealing with sovereignty, the discourse around PSNR treats it
as a principle, and not as a basic right of states.18 Moreover, there is little
clarity with respect to the meaning and scope of the terminologies,
rights or duties in the resolution on PSNR. Nevertheless, it is clear that
15
Karol N Gess (1964), supra note 9
16
See Schrijver (1997), supra note 6, pp. 306-367; Lorenozo Cotula, ‘Reconsidering Sovereignty,
Ownership and Consent in Natural Resource Contracts: From Concepts to Practice’ in M. Bungenberg, M.
Krajewski, C. Tams, and J. Terhechte (eds.) European Yearbook of International Economic Law (Cham: Springer
2018), pp. 143–174.; ChamF X Perrez, ‘The Relationship between ‘‘Permanent Sovereignty’’ and the
Obligation not to cause Transboundary Environmental Damage’ (1996) 26:4 Environmental Law,
pp. 1187–212.
17
See Petra Gümplová, ‘Restraining permanent sovereignty over natural resources’ (2014) 53 Enrahonar.
Quaderns de Filosofia, 93–114; Tyagi (2015) supra note 17.
18
Yogesh Tyagi, ‘Permanent Sovereignty over Natural Resources’ (2015) 4:3 Cambridge Journal of
International and Comparative Law, 588–615.

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 N. Srivastava

right to self-determination includes rights of people, and PSNR

recognises rights of state as well as its people.19 As right holders,
people have the right to have a greater participation in the decision
making and benefit stream of natural resources. While ‘people’ has not
been defined in the Resolution or any of preparatory documents, rights
recognised under PSNR extend to indigenous people.20

2.3 Recognition and adoption of PSNR in international awards

and judgments

PSNR, as a legal concept has come a long way since the 1960s, when it
was first discussed and adopted as a resolution by UNGA. International
arbitration Tribunals in their awards have time and again recognized
PSNR. In Libyan American Oil vs Libya, the Tribunal observed that
UNGA resolutions pertaining to PSNR are ‘‘if not a unanimous source
of law, (are) evidence of the recent dominant trend of international
opinion concerning the sovereign right of States over natural
resources’’.21 This view was reiterated in Texaco arbitration case.22 The
tribunal in American Independent Oil Company vs Kuwait, held that the
PSNR resolution lays ‘‘the most general formulation of the rules
applicable for a lawful nationalisation’’.23
The concept, whether one calls it a principle or a law, has been
discussed by the International Court of Justice, albeit in cases not strictly
related to energy resource development. In DRC vs Uganda, the ICJ
while ruling on armed activities on the territory of the Congo did not
apply PSNR to looting and pillage etc, but nevertheless recognised the
importance of the principle of PSNR as part of customary international
law.24 In East Timor case, the ICJ also recognised the right to self-

19
Para 1 of the 1962 Resolution states, ‘‘The right of peoples and nations to permanent sovereignty over
their natural wealth and resources must be exercised in the interest of their national development and of the
well-being of the people of the State concerned.’’
20
Endalew Lijalem Enyew, ‘Application of the Right to Permanent Sovereignty over Natural Resources
for Indigenous Peoples: Assessment of Current Legal Developments’, (2017) 8 Arctic Review on Law and
Politics, pp. 222–245.
21
Libyan American Oil Company (LIAMCO) v Government of the Libyan Arab Republic, Award (12 April 1977)
(1982) 62 Intl L Rep 140.
22
Texaco Overseas Petroleum Company v California Asiatic Oil Company and the Government of Libyan Arab
Republic (Compensation for Nationalised Property)(Award on the Merits) (1977) (1978) 17 ILM 1.
23
Award in the Matter of an Arbitration between Kuwait and the American Independent Oil Company
(AMINOIL) (1982) 21 ILM 976.
24
Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v Uganda) (Judgment) [2005]
ICJ Rep 168.

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State, courts and energy resources in India: revisiting

determination in PSNR as ‘‘one of the essential principles of contem-

porary international law’’.
More recently, the principle of PSNR has found way in WTO
jurisprudence as well. In the recent China Rare Earths case, the Panel
recognised PSNR as a general principle and a relevant rule of
international law, but restrained from recognising it as a right that
can override a state’s obligations under WTO.25
Traditionally, countries that have been influential in the global
politics, countries which have been steering international law and
policy, have not prioritised PSNR.26 However, the world order in which
PSNR emerged has undergone a change with the global South
becoming more prominent in world economy and as resource
consumers and investors.27 The dichotomy of north-south is shifting
to issues of equity and sustainability within the South. This necessitates
a review of how countries, especially from the global south have
approached and adopted permanent sovereignty in their domestic
policies and decisions. In this context, the following section critically
evaluates the concept and principles of sovereignty, and PSNR in
particular, in the Indian natural resources sector.

3 Energy resources, nationalisation and contracts in India

In the twentieth century, transnational companies in the energy sector

substituted the colonial rulers and became agents of ‘western economic
imperialism’.28 Owing to its genesis, the main thrust of PSNR initially
was to encourage developing countries to assert their economic
independence making use of natural resources, which in several
countries resulted in nationalization of resources controlled by multi-
national or foreign corporations in the past.29
Article 294 of the Constitution of India states that all property and
assets vested in His Majesty for government of Dominion of India and
25
China-Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum-Reports of the Panel (26
March 2014) WT/DS431/R, WT/DS432/R and WT/DS433/R.
26
Yogesh Tyagi, (2015) supra note 17.
27
K Khoday, ‘The Emerging South and the Evolution of Sovereignty over Natural Resources’ in Global
Trends: Law, Policy & Justice Essays in Honour of Professor Giuliana Ziccardi Capaldo. (Oxford, New York, 2013).
28
Mason Willrich, Energy and World Politics (New York: The Free Press 1975), p 15.
29
Daniel Augustein,‘Paradise Lost: Sovereign State Interest, Global Resource Exploitation and the
Politics of Human Rights’ (2016) 27:3 The European Journal of International Law, 669–691; Subhash C. Jain,
‘Permanent Sovereignty Over Natural Resources and Nationalization in International Law’(1977) 19:3
Journal of the Indian Law Institute, pp. 241–256.

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 N. Srivastava

Government of each Governor’s Province before the Constitution,

were transferred to the Union and States respectively. Along with
vesting of property and assets, all rights, liabilities and obligations were
also transferred to Union and State governments. With respect to
offshore resources, Article 297 vest rights over all lands, minerals and
other things of value underlying the ocean within the territorial waters,
or the continental shelf, or the exclusive economic zone, with the
Union. Therefore, a combined reading of Articles 294–297 of the Indian
Constitution suggests that the ownership rights on all land and natural
resources located within the territory of the state, vest in the state and
all the land and mineral resources underlying the ocean within the
territorial waters, or the continental shelf, or the exclusive economic
zone30 belongs to the Union of India. Minerals and energy resources are
leased out for extraction by the government either under a conces-
sionary regime or an auction regime. In effect, States have the right to
freely exploit in any manner the natural resources within their
territories.31 However, the Union retains several powers and control
over resources through central laws governing natural resources such as
forests, energy and non-fuel minerals.32 Governments, whether State or
Union, perform multiple functions vis-à-vis resources—owner, trustee,
regulator, contractor. Some of these are going to be discussed in the
following sections of this paper, which delves into the nationalisation of
two of the most important energy resources in the country—coal and
oil. Coal and oil accounted for 56% and 30% respectively of the total
primary energy mix in 2018.33

3.1 Nationalisation of coal and oil

Coal has been a major source of primary energy in the country from
colonial times but it was an industry dominated by private companies.
Despite some recommendations for nationalisation, the Industrial
Policy Resolutions of 1948 and 1956 did not support nationalisation of
30
Inserted by the Constitution (Fortieth Amendment) Act, 1976.
31
A David Ambrose, ‘Directive Principles of State Policy and Distribution of Material Resources With
Special Reference To Natural Resources – Recent Trends’ (2013) 55 Journal of the Indian Law Institute, 1–20.
32
For a discussion on centre-state issues in natural resource ownership and control, see L Noronha and N
Srivastava, D Datt and P V Sridharan, ‘Resource Federalism in India: The Case of Minerals’ (2009) 44:8
Economic and Political Weekly, pp. 51–59; Rohini Chaturvedi, ‘India’s forest federalism’ (2016) 24:1
Contemporary South Asia, pp. 1–18.
33
BP, BP Statistical Review of World Energy (BP, 2019); Available at https://www.bp.com/content/dam/
bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2019-full-
report.pdf, Last accessed on 10 June 2019.

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State, courts and energy resources in India: revisiting

coal. However, National Coal Development Corporation, a public

sector undertaking was established in 1956 to foray into areas
considered unprofitable by private sector.34 Soon after, recognising
the importance of coal, the Parliament enacted Coal Bearing Areas
(Acquisition and Development) Act in 1957 to lay down special
provisions for acquisition of land for coal mining thereby increasing the
control over coal industry in the ‘economic interest’ of India. As noted
by the court in Mahanadi Coalfields case, the Act was based on the ‘‘twin
principles of the eminent domain of the sovereign and the largest good
of the largest number’’.35
In 1973, Coal Mines Nationalisation Act was legislated to nationalise
all coal mining in the country. The stated objective was to ‘‘ensure the
rational, co-ordinated and scientific development and utilisation of coal
resources’’ to meet the increasing demands. It aimed at vesting
ownership and control of coal in the State to distribute resources to
subserve the common good.
Self- reliance and national capacity were main drivers of oil and gas
policy in early years of independence.36 Oil crises of the 1970s37 did not
hit India as much as other oil importing countries across the globe, but
it did result in soaring import bills and bilateral agreements with oil-
producing countries.38 A greater need for exploration and resources for
Oil and Natural Gas Commission and Oil India limited was clearly felt.
These factors led to nationalisation of oil companies owned by
members of the ‘seven sisters’39 in mid 1970s. The Esso (Acquisition of
Undertakings in India) Act, 1974, the Burmah Shell (Acquisition of
Undertakings in India) Act, 1976, and the Caltex (Acquisition of Shares
of Caltex Oil Refining (India) Limited and of the Undertakings in India

34
Rajiv Kumar, ‘Nationalisation by Default: The Case of Coal in India’ (1981) 16:17 Economic and Political
Weekly (Apr. 25, 1981), pp. 757–768.
35
Mahanadi Coal Fields Ltd. & Another v/s Mathias Oram & Others; Special Leave to Appeal (C) No. 6933
of 2007; SC Judgment dated 10 July 2017.
36
Ligia Noronha and Nidhi Srivastava, ‘Oil and gas federalism in India’ in Anderson George ed. Oil and
Gas in Federal Countries (Oxford University Press, Canada, 2012, 121.
37
For an overview of the oil crises of the 1970s and its implications, see Fiona Venn, The Oil Crisis
(Routledge 2002).
38
Saumitra Chaudhury, ‘Nationalisation of Oil Companies in India’ (1977) 12:10 Economic and Political
Weekly, (Mar. 5, 1977), pp. 437?439–444.
39
Somewhere in the 1950s, an Italian tycoon by the name Enrico Mattei referred to certain Anglo
American Oil companies as ‘Seven Sisters’, which controlled the global oil and gas industry. The seven
sisters comprised Anglo Persian Oil Company (British Petroleum), Gulf Oil (now divided into British
Petroleum and Chevron), Standard Oil of California (Chevron), Texaco, Royal Dutch Shell, Standard Oil
Company of New Jersey (now Exxon), and Standard Oil Company of New York (Mobil, and now
ExxonMobil).

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 N. Srivastava

of Caltex (India) Limited) Act, 1977 were enacted based on generous

nationalisation packages given out to oil producing and refining
companies.40 Nationalisation did not have much of a positive impact on
the oil and gas sector. The position changed in 1999, when New
Exploration and Licensing policy (NELP) was promulgated to revive the
sector by providing a level playing field to private sector.
An attempt to sell the government shareholding in government oil
companies was made earlier, but the Supreme Court did not allow such
privatisation without an amending act of the Parliament.41 The reason
given was procedural, that is, that unlike aluminium and other metals,
coal, oil and gas were nationalised through legislative enactments, not
administrative action.42 In 2016, the government has repealed a number
of nationalisation Acts clearing the road for privatisation, including
those relating to coal, oil, copper, through a Central Repealing and
Amending Act.
It must be noted that sovereignty was not invoked explicitly in any of
the nationalisation Acts. Preambles of these Acts did not invoke
sovereignty but cite Article 39 (b), which directs the state policy to
ensure that ‘‘ownership and control of the material resources of the
community are so distributed as best to subserve the common good’’ to
take ownership. Although the two are intrinsically linked, it is
interesting to note that the Nationalisation Acts formed the basis of
asserting sovereignty via Article 39(b). The relationship between the
policy to distribute resources to subserve common good and
sovereignty vesting in people, as enunciated by the Supreme Court, is
discussed subsequently in the paper.

3.2 Licenses and contracts

Natural resource contracts are indispensable to exploration and

extraction of natural resources. These instruments take shape out of
overlaying claims and expertise of a multitude of stakeholders. The
state, in exercise of its sovereignty, remains the most important
stakeholder as an owner (whether on its own or on behalf of people)

40
Saumitra Chaudhury (1977) supra note 37.
41
Centre for Public Interest Litigation v. Union of India, (2003) 7 SCC 532.
42
Apoorv Kurup, ‘Privatization and the Indian Judiciary’ (2006) 48:3 Journal of the Indian Law Institute,
(July-September 2006), pp. 425–434.

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State, courts and energy resources in India: revisiting

and regulator. Ownership, sovereignty, and consent are seen as the

three mainstays of resource contracts.43
Rights and obligations of stakeholders in resource related contracts,
licenses, lease etc that are awarded depends upon the regime of natural
resources. Broadly, these can be (1) concessionary system, (2) produc-
tion sharing arrangement, (3) the participation agreement, and (4) the
service contract.44 These can be awarded through bilateral negotiations
(or open door or first come first serve process) or auctions.45 In either
case, the purpose of these arrangements is to ensure best interest of the
people, while state exercises sovereignty over its territory and natural
resources.
State as a contracting party, where it enters into a contractual
relationship with developers, and state as a regulator are two distinct
roles but often overlap,46 making sovereignty over resources an even
more complicated concept when applied domestically. As an interna-
tional concept or principle, PSNR is fairly clear in establishing nations’
sovereign rights over natural resources that are found in their
jurisdictions. However, operational aspects of this right within the
territory of a nation varies across countries, and across resources as
well. As a party to the contract, state often becomes a facilitator for
approvals and is instrumental in obtaining or brokering consent. On the
one hand state exercises sovereignty in dealing with resource develop-
ment companies and taking natural resource decisions, on the other
hand it acts only on behalf of the people, in whom the sovereignty
ultimately vests. Such complexities compel international notions of
sovereignty to be deconstructed at a domestic level. The following
section discusses these complexities in the Indian context, relying on the
Supreme Court decisions relevant to PSNR.

43
Lorenozo Cotula, ‘Reconsidering Sovereignty, Ownership and Consent in Natural Resource Contracts:
From Concepts to Practice’ in M. Bungenberg, M. Krajewski, C. Tams, and J. Terhechte (eds.) European
Yearbook of International Economic Law (Cham: Springer 2018), pp. 143–174.
44
Ernest E. Smith and John S. Dzienkowski, ‘A Fifty-Year Perspective on World Petroleum
Arrangements’ (1989) 24:1 Texas International Law Journal (Winter 1989), 13–46, cited in Reliance Industries
Limited v. Reliance Natural Resources Limited (2010) 7 SCC 1.
45
Natural Resource Governance Institute, ‘Granting Rights to Natural Resources Determining Who
Takes Natural Resources Out of the Ground’, (NRGI March 2015); https://resourcegovernance.org/sites/
default/files/nrgi_Granting-Rights.pdf last accessed on 10 December 2019.
46
Usha Ramanathan, ‘On eminent domain and sovereignty’ (2010) 613 Seminar, September 2010.

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4 Supreme court of india and sovereignty over resources

4.1 International law as the law of land

Constitution of India gives the Parliament the power to make any law
to implement a treaty, agreement or convention, or ‘any decision made
at any international conference, association or other body’.47 Whether
the international law automatically becomes the law of the land (as in
systems following monoism) or only after a legislation is enacted to
make it a part of domestic law (as in systems following dualism) is a
little complex than a simple reading of Article 253.48 The Supreme
Court itself has not been consistent in applying international law,
principles and treaties and according it a status of domestic law.
In State of West Bengal vs. Kesoram Industries, it was clarified that the
doctrine of dualism applies in India. It noted that, ‘‘A treaty entered into
by India cannot become law of the land and it cannot be implemented
unless Parliament passes a law as required under Article 253.’’49 This
position had been adopted by the Court in an earlier case when dealing
with a conflict between municipal and international laws. It held that
‘‘until the municipal law is changed to accommodate the Covenant
what binds the court is the former, not the latter’’.50 Similar stance has
been taken in other judgments by the Supreme Court and various High
Courts.51
There is another body of jurisprudence which does not emphasise
upon the need to legislate giving effect to an international agreement,
convention, etc. This approach comes from, inter alia, a combined
reading of Article 253 and Article 51 (c) where endeavour to ‘foster
respect for international law and treaty obligations’ is a directive
principle of state policy. In National Legal Services Authority Vs. Union of
India, SC held that where no conflicting act of Parliament exists, courts
have to respect international law.52 This is in line with the SC opinion in
47
Art 253, Constitution of India.
48
Prabhash Ranjan, Anmolan and Farheen Ahmed, ‘Is the Supreme Court Confused About the
Application of International Law?’ (2016) The Wire, dated 28 September 2016; https://thewire.in/law/
supreme-court-international-law; Last accessed on 1 December 2019.
49
State of West Bengal vs. Kesoram Industries Ltd. & Ors. (2004) 10 SCC 201.
50
Jolly George Varghese Vs. The Bank of Cochin [AIR 1980 SC 470].
51
Selvi & Ors vs State of Karnataka & Anr, Supreme Court Judgment on 5 May, 2010; Gramophone
Company of India Ltd vs Birendra Bahadur Pandey & Ors Supreme Court Judgment on 21 February, 1984 ;
T.Rajkumar vs Union of India Madras High Court judgment on 1 November, 2013,; P. Geetha vs The Kerala
Livestock Development, Kerala High Court Judgment on 18 June, 2014.
52
National Legal Services Authority (NALSA) Vs. Union of India. AIR 2014 SC 1863.

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State, courts and energy resources in India: revisiting

Vishaka vs State of Rajasthan, which called for reading international

conventions and norms into the constitutional scheme and having
regard to international conventions and norms in framing domestic
laws and when there is a void in the domestic law.53
It is noteworthy that the courts have not confined themselves to
treaties and conventions, but included customary international law as
well. In the famous Vellore Citizens Forum case, the Supreme Court,
relying on Stockholm Declaration, Brundtland Commission report and
Rio Convention, held precautionary principle and the polluter pays
principle to be a part of customary international law and consequently,
a part of domestic environmental law. The Court opined as follows,
…once these principles are accepted as part of the Customary International Law
there would be no difficultly in accepting them as part of the domestic law. It is
almost accepted proposition of law that the rule of Customary International Law
which are not contrary to the municipal law shall be deemed to have been
incorporated in the domestic law and shall be followed by the Courts of Law.54
Vellore citizens case guided a number of environmental pollution cases
that followed. Doctrine of Public Trust55 is another concept that has
been adopted by Supreme Court time and again. First invoked in 1995,
in a matter concerning environmental damage as a result of a motel
being constructed in an ecologically fragile area,56 the doctrine
continues to be relied upon in matters of environment and natural
resources.

4.2 Supreme court, natural resources and sovereignty

That the Supreme Court of Indian has a penchant for referring to and
relying on international law norms and principles in adjudicating
matters, especially those of public interest, is evident in the rich
jurisprudence it has evolved on environment and natural resources.
However, the principle of permanent sovereignty has not been

53
Vishaka and others vs. State of Rajasthan and others. AIR 1997 SC 3011.
54
Vellore Citizens Welfare Forum vs. Union of India. AIR 1996 SC 2715.
55
The doctrine of Public trust propounds that certain properties such as rivers, streams etc are held by
the government as a trustee of the public. Joseph L Sax expanded this concept to include environment and
natural resources in his seminal work in 1969. Joseph L Sax, Joseph L. Sax, The Public Trust Doctrine in
Natural Resource Law: Effective. Judicial Intervention (1969) 68 Michigan Law Review, 471–566.
56
M.C. Mehta v. Kamal Nath, (1997) 1 SCC 388; See generally, Shibani Ghosh, ‘Public Trust Doctrine in
Indian Environmental Law’ in Shibani Ghosh (Ed) Indian Environmental Law: Key Concepts and Principles
(Orient Black Swan, 2019).

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 N. Srivastava

discussed and adopted by the courts as much as other principles relating

to natural resources, such as for instance, the public trust doctrine. To
illustrate this, the paper reviews some judgments with respect to energy
and other natural resources in order to study how sovereignty has been
applied and the extent to which PSNR, along with its components, has
been adopted by the courts.
Sovereignty and eminent domain can be said to be the foundation of
laws for land acquisition laws in India. Eminent domain, the power of
the government to take private land for public use, itself gets its
wherewithal from sovereignty.57 Drawn from international law, the
concept of ‘sovereignty’ refers to supreme authority within a state or
territory.58 As discussed earlier in the paper, the concept has evolved to
expand from authority over territory to land and natural resources
within the territory. While a founding principle of international
relations and law, sovereignty also defines state’s relationship with its
own people. It can be explained in terms of Bodin’s description of
sovereignty as, ‘‘supreme power over citizens and subjects, unrestrained
by the laws’’.59
As noted by some scholars, experience from land acquisition and
approvals for development projects in India strongly suggests that the
concept of eminent domain and sovereignty has been extended to assert
power and control over lives of people.60 The unchecked and
unregulated power of the State to divert land for ‘public purpose’ over
time expanded state sovereignty over land as well as resources in the
country.61 Public purpose, defined loosely in the Land Acquisition Act
of 1894, left a large room for interpretation and determination by the
executive.62 Although, the 2013 Act’s63 definition of ‘public purpose’ is
wide enough to put some of the disputes to rest, the larger question of
who benefits and who loses as a result of acquisition remains unsettled.

57
See Meenakshi Gogoi, ‘The Nexus between Sovereignty and ‘Eminent Domain’ under the Land
Acquisition Act, 1894, and the Land Act, 2013’ (2018) 48:2 Social Change, 173–187.
58
Samantha Besson (2011) supra note 5.
59
W. A. Dunning, ‘Jean Bodin on Sovereignty’, (1896) 11:1 Political Science Quarterly, 82–104.
60
Usha Ramanathan (2010) supra note 45.
61
Meenakshi Gogoi (2018) supra note 56.
62
Usha Ramanathan, ‘A word on Eminent Domain’ in L. Mehta (ed) Displaced by Development: Confronting
Marginalisation and Gender Injustice, (Sage 2009), 133–145.
63
Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement
Act, 2013.

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State, courts and energy resources in India: revisiting

Moreover, not all purposes enjoy the same level of legitimacy in a

planned development.64
Sovereignty over natural resources adds another level of complexity
to sovereignty over land. As discussed earlier in the discussion on
Articles 294–297, natural resource assets and rights vest in Union and
State governments who perform multiple functions vis-à-vis resources—
owner, trustee, regulator, contractor. Minerals and energy resources are
leased out for extraction by the government either under a conces-
sionary regime or an auction regime. In either case, the government
enters into a contract with private entities for development of resources.
The contracts and memoranda of understanding signed by government
are manifestation of sovereignty of the state, not as a regulator but as a
party to a contract.65 If State is a regulator, the question that arises is
who has sovereignty over resources—government or the public? Based
on a close interaction between constitutionalism and popular
sovereignty,66 every trace of sovereignty was yielded to the people in
Indian Constitution and polity.67 This leads us to another related
question, ‘who owns the resources?’
In the 2G spectrum case,68 the Supreme Court considered spectrum to
be a scarce, finite and natural resource, and elaborated on its ownership
regime. It cited permanent sovereignty over natural resources as a
principle of customary international law and one of the bases for
ascertaining ownership. In the Reliance natural gas dispute case, SC
referred to UNGA Resolution on permanent sovereignty to locate
people’s ownership over natural resources, which must be used
responsibly as a part of their ‘right to self-determination’.69 The courts
have referred to permanent sovereignty of government on a few other
occasions too.70 However, it must be noted that the Court in the

64
Amlanjyoti Goswami, Land Acquisition, Rehabilitation and Resettlement: Law and Politics. (Indian Institute
for Human Settlements 2011), IIHS. Retrieved from IIHS Knowledge gateway: http://iihs.co.in/wp-
content/uploads/2013/11/Land_Acquisition_Law_and_Politics_Amlanjyoti_Goswami.pdf, last accessed on
2 December 2019.
65
Usha Ramanathan (2010) supra note 45.
66
Sarbani Sen, The Constitution of India: Popular Sovereignty and Democratic Transformations (New Delhi:
Oxford University Press, 2007).
67
S. N. Dwivedi, ‘Location of Sovereignty in India’, (1967) 9:1 Journal of the Indian Law Institute, pp. 71-84;
Virendra Singh v. State of Uttar Pradesh [1955] 1 SCR 4.
68
Centre for Public Interest Litigation and others v. Union of India and others (2012) 3 SCC 1.
69
Reliance Industries Limited v. Reliance Natural Resources Limited (2010) 7 SCC 1.
70
Vedanta Limited & Ors vs Directorate General of Foreign Trade, LPA 48/2017, CM APPL. 2395/2017, CM
APPL. 27489/2017; Cairn India Limited & Ors vs Directorate General of Foreign Trade, in W.P.(C), 11600,30709
of 2015, Delhi High Court Judgment dated Oct 18, 2016.

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 N. Srivastava

Presidential Reference on method of allocating natural resource

restrained from citing the concept of permanent sovereignty over
resources. Justice Khehar, in his concurring opinion in the Natural
Resources Allocation reference, does discuss sovereignty, but only in the
context of executive governance, whereby anybody holding public
office is accountable to the public, ‘‘in whom sovereignty vests’’.71
Natural Resources are vested in the government, which is ‘deliberate,
and not an incidental’ and does not imply absolute ownership in the
traditional sense.72 With private players in the field, the state plays the
role of a regulator to ensure that resources are distributed equitably. It
is more akin to an obligation than a power vested in the government.73
The Constitutional bench in Natural Resources reference held
distribution of natural resources to be a matter of economic policy
and therefore, a prerogative of the executive. While not possible to
measure by any constitutional touchstone, the decisions and action for
natural resource development has to ensure that common good is
subserved.74

4.3 Sovereignty on behalf of people

Globally, PSNR has grown from a limited and state-centric approach to

community-centric approach with greater recognition of rights of
people over resources.75 While classical sovereignty was State
sovereignty, the subject of modern sovereignty is the people.76 Rights
of people, based on self-determination, are read as allowing greater
public participation in natural resource decision-making.77 Traditional
approaches of viewing natural resource exploitation as agreements

71
Para 8 of opinion by Justice Jagdish Singh Khehar in Natural Resources Allocation, In re, Special Reference
No. 1 of 2012 (2012) 10 SCC 1.
72
Reliance Industries Limited v. Reliance Natural Resources Limited (2010) 7 SCC 1.
73
Zoheb Hossain and Alok Prasanna Kumar, ‘The New Jurisprudence of Scarce Natural Resources: An
Analysis of the Supreme Court’s Judgment in Reliance Industries Limited vs Reliance Natural Resources
Limited’, (2010) 4:1 Indian Journal of Constitutional Law, 104–114.
74
Natural Resources Allocation, In re, Special Reference No. 1 of 2012 (2012) 10 SCC 1.
75
A Alam, A A Faruque, ‘From sovereignty to self-determination: emergence of collective rights of
indigenous peoples in natural resources management’. (2019/ in press) 32: 1 Georgetown International
Environmental Law Review.
76
Samantha Besson (2011) supra note 5.
77
Y T Chekera and V O Nmehielle, ‘The International Law Principle of Permanent Sovereignty over
Natural Resources as an Instrument for Development: The Case of Zimbabwean Diamonds’ (2013) 6 African
Journal of Legal Studies, 69–101.

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State, courts and energy resources in India: revisiting

between investors and states is being revisited to hold communities

central to natural resource agreements.78
In Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd,79 the SC held that
‘material resources of the community’ goes beyond natural resources
owned by the public, to include all natural and man-made, public and
private-owned resources, an approach reiterated in several subsequent
rulings.80 It clarified that ‘distribution’ in the context of article 39
(b) encompasses all forms, such as distribution between regions,
industries, classes and nature of ownership. In upholding the nation-
alisation of coal mines, the Court also opined that Article 39 (b) is
aligned with the philosophy of socialism in envisaging that ‘ownership,
control and distribution of national productive wealth for the benefit
and use of the community’ and not for selfish ends.
While adjudicating on matters relating to natural resources, Indian
courts have relied more often on directive principles of state policy than
on sovereignty over resources. Art 39 (b) of the Constitution of India
directs the state to secure ‘‘that the ownership and control of the material
resources of the community are so distributed as best to subserve the common
good’’. Although the phrase PSNR is not included the Constitution, some
aspects of it are reflected in directive principles of state policy,
particularly in directing that distribution of material resources be ‘as
best to subserve the common good’.81
In the 2G spectrum case, SC observed that world over Constitutions
recognise ‘natural resources as owned by, and for the benefit of, the
country’. In recognising the sovereign state as the owner of natural
resources, it is the ‘people’ whose ownership is established.82 The Court
had taken a similar position earlier in the Reliance gas case, where it
noted that natural resources belong to the people of this country as per
the constitutional mandate.83 Even when resources are vested with the
government, the government holds it in trust for its people. Thus, time
and again, without describing it in the language of sovereignty, the
courts have recognised the sovereignty of people over natural
resources. In the Reliance gas disputes, the court did refer to right of
78
Lorenzo Cotula, (2018) supra note 42.
79
AIR 1984 SC 239.
80
Mafatlal Industries Ltd. V. Union of India (1997) 5 SCC 536, State of Tamil Nadu v. Abu Kavur Bai AIR 1984
SC 326.
81
Article 39 (b).
82
Centre for Public Interest Litigation and others v. Union of India and others (2012) 3 SCC 1, para 64.
83
Reliance Industries Limited v. Reliance Natural Resources Limited (2010) 7 SCC 1.

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 N. Srivastava

self-determination but did not delve deeper into it, especially in terms of
linking it to sovereignty. It noted how people exercise their permanent
sovereignty, through their elected representatives, towards the objec-
tives of national development, revenue generation etc.84 In another
earlier dispute pertaining to gas, SC held that no one state should be
allowed to develop natural gas in a manner that deprives other States of
their share as the entire country has a stake in it.85 In summary, the
current jurisprudence holds Article 39 (b) and Article 14 paramount to
any decision or policy relating to alienation of natural resources.86
The bench in 2G spectrum case also held that spectrum must be
alienated on the principles of principles of equality and public trust to
ensure that it is not contrary to public interest, and suggested
distribution through the method of auction.87 However, in the
subsequent presidential reference on natural resources allocation, the
Constitutional Bench clarified that this position is restricted to
spectrum, and does not extend to all the natural resources as even
39(b) does not fix the methodology of distribution.88 The majority
judgment emphasised that ‘common good’ is the overarching principle
governing ‘distribution’ of natural resources and therefore, it cannot be
limited to any one method, namely, auction. All methods of distribution
or allocation that subserve the common good as envisaged in Article
39(b) are constitutional.
The bench in the Presidential reference, interestingly, did not go deep
into the issue of public trust doctrine and restricted the examination of
the issue at hand to judicial scrutiny on lines of fairness and due
process.89 It also rejected the argument parliament or government was
an agent of people, in whom sovereignty was located clarifying that the
legislature is not an agency of people but gets its authority from the
Constitution. It did, however, discuss people’s sovereignty in the
context of executive governance, where all powers in a public office
must be exercised for public good and in public interest. In doing so, it
rejected the argument that Article 14 mandates revenue maximisation
to be the purpose of disposal of resources for commercial use.
84
Reliance Industries Limited v. Reliance Natural Resources Limited (2010) 7 SCC 1, para 114.
85
Association of Natural Gas and others vs Union of India (2004) 4 SCC 489.
86
Goa Foundation v. M/S Sesa Sterlite Ltd. & Ors, (2018) 4 SCC 218; Natural Resources Allocation, In re, supra
note 87.
87
Centre for Public Interest Litigation and others v. Union of India and others (2012) 3 SCC 1.
88
Natural Resources Allocation, In re, Special Reference No. 1 of 2012 (2012) 10 SCC 1.
89
With reference to Article 14, Constitution of India.

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State, courts and energy resources in India: revisiting

Overall, the Supreme Court over the years has recognised that
Directive Principles of State Policy cast an obligation upon the state to
distribute resources in a manner that makes people of the country
beneficiaries.90 Even though the mode and method of making people
the beneficiaries is not settled, it is agreed that state exercises
sovereignty over resources on behalf of its people.91

5 Conclusion

This paper has reviewed and studied how the concept of PSNR has
developed and evolved into a principle of international law. It has been
recognised in rulings of international courts and tribunals, even referred
to customary international law. However, ultimately, the principle is
applied within the jurisdiction of a state and its applicability, uptake and
impact can be truly assessed in a particular country context. In this
context, the paper undertook a detailed study of energy resources sector
in India.
In the international negotiations for PSNR, India was not as active as
other developing and formerly colonised countries of Latin America,
Asia and Africa. Nevertheless, it did play an important role in suggesting
amendments that were finally more agreeable to countries. In its actions
closer to home, sovereignty was implied but not expressly stated in
several natural resource related decisions, such as nationalisation of
coal, oil and gas in the 1970s.
Supreme Court in India has played an important role in applying
international concepts and principles in areas of public interest for
decades. While several international law and principles have often
found way in court rulings, not much reliance has been placed on
PSNR. There has been some passing reference in a handful of cases, but
in most of natural resource cases courts have anchored their judgments
in directive principle of state policy. Even when upholding sovereignty
on behalf of citizens, the emphasis has been on firstly, distribution of
natural resources to subserve common good, secondly, on due process
and fairness, thirdly, has had little to say on rights of communities,
especially towards self determination, an important element of PSNR.
Even when state is recognised as an owner on behalf of citizens (public

90
Ambrose (2013) supra note 30.
91
Ibid.

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 N. Srivastava

trustee), the issue at stake is distribution, methods of allotment, revenue

etc. and not the right of communities to participate in the decision-
making process vis-à-vis natural resources, especially energy, in which
the entire nation has a stake.

Acknowledgements I gratefully acknowledge the rich discussions with Professor Fazil Jamal, School of
International Studies, Jawaharlal Nehru University (JNU) on the subject and international energy law in
general. I am thankful to Professor Nupur Chowdhury, Centre for Studies in Law and Governance, JNU for
discussing the idea and encouraging to explore this area of study. I humbly thank the anonymous reviewer
for the valuable comments that helped me in improving the paper.

Publisher’s Note Springer Nature remains neutral with regard to jurisdictional claims in published maps
and institutional affiliations.

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