White Industries Australia

Ltd. Vs. The Republic of India

Facts of the case
• During the 1970's and 1980's, India decided that it needed to develop its coal
resources.
• One of the areas of focus was Piparwar and, through its state-owned and
controlled company, Coal India, India began exploration work there in the late
70’s
• As a Public Sector Undertaking, Coal India discharged purely commercial
functions. To this end, Coal India had been conferred with various powers,
including, within limits, the power to approve its own
projects.
• However, with respect to projects proposed to be undertaken whose capital
requirements exceeded those which its board of directors was entitled to
approve, approval was required from the Government of India ("GOI")
• Coal India's subsidiary, Central Mine Planning and Design Institute Limited ("CMPDI") undertook
extensive drilling in the region where the Piparwar mine would subsequently be located
• A delegation from India's Ministry of Coal and Coal India visited Australia to inspect Australian
mining technology. Various Australian companies, including White, were involved in the
"marketing" to the Indian representatives
• After the representatives returned to India, it appears that CMPDI was requested by the Ministry
of Coal to prepare a feasibility report in relation to the development of the mine at Piparwar.
• CMPDI commenced preparation of that report in around 1988, and requested White to assist in
its preparation. White assisted CMPDI in the preparation of that report as well as another
detailed feasibility study. Claimant's ultimate interest was to negotiate a contract with Coal India
to supply equipment
• Claimant was told at these meetings that Respondent was a safe place in which to invest and that
India’s laws were derived from English law, so Claimant would understand the legal system and
would be treated fairly.
• On 28 September 1989, against the background of the preceding discussions,
White entered into a contract with Coal India (on behalf of its subsidiary, Central
Coalfields Limited) for the supply of equipment to, and development of a coal
mine at Piparwar, India ("Contract"). In return, White was to be paid
approximately A$206.6 million.
• The Contract provides for a production target of 2.76 million tonnes of washed
and processed coal to be produced by the Coal Preparation Plant during an
initial six month demonstration period
• The Contract provides that White was to be entitled to a bonus where
production was in excess of the target figure and, conversely, White was also
liable to a penalty where production was below the target figure.
• Under the Credit Agreement, Coal India, as the Borrower, irrevocably authorized
Australia’s Export Finance and Insurance Corporation "to make payment of
proceeds of each Disbursement in Australian currency at the Exchange Rate to or
at the direction of the Exporter or into the Exporter’s Account [White]" and it
agreed that "each payment so made shall constitute a loan to the Borrower.
• Disputes subsequently arose between Coal India and White as to whether White was entitled
to the bonuses and/or Coal India was entitled to penalty payments. A number of other related
technical disputes also arose, primarily concerning the quality of the washed and processed
coal and the sampling process by which quality would be measured.
• Coal India considered that a penalty was due under the Contract because it felt that the quality
of washed coal produced by the Coal Preparation Plant did not meet the contractual standard.
In these circumstances, Coal India rejected White's demand for payment of a bonus on the Coal
Handling Plant and Coal Preparation Plant and cashed the Bank Guarantee (the "Bank
Guarantee") to the extent of A$2,772,640.
• Coal India called upon a Bank Guarantee provided by Claimant in the amount of A$2.77 million.
This was cashed by Coal India and the money retained
• White filed a Request for Arbitration with the ICC dated 28 June 1999
• Tribunal held that the White was entitled to an award of A$4.08 million
• On 6 September 2002, Coal India applied to the High Court at Calcutta to have the Award set
aside
• On 11 September 2002, White applied to the High Court at New Delhi to have the Award
enforced.
Argument of White Industries to prove that
“investment” has been made
• White notes that "investment" has been defined in the BIT in the broadest terms
• White contends that Salini test is specific to arbitrations under the ICSID Convention
• However, still White submits that it made an investment in India for the purpose of the Salini test.
• Rules 23: The economic materialization of an investment requires the
commitment of resources to the economy of the host State by the
claimant, entailing the assumption of risk in expectation of a
commercial return
• India asserts that none of the categories of alleged "investment" relied on by White
meets these requirements