Mumbai, 1 April 2014

Supreme Court has appointed an international arbitrator in the KG D6 issue. Australia’s Hon’ble Justice Mr. James Spigelman will be the third arbitrator and shall be the Chairman of the Arbitration Tribunal.

The government of India had opposed the appointment of an International Arbitrator, whereas Reliance had submitted that the third arbitrator can be an International Arbitrator not being from India, Britain or Canada, where the three stakeholder companies are based. Reliance has a 60% stake in the KG D6 block, Britain’s BP has a 30% stake and Canada’s Niko has a 10% stake.

Supreme Court accepted Reliance’s argument and appointed Hon’ble Justice Mr. James Spigelman, a former Chief Justice of New South Wales in Australia from 1998 to 2011. Poland-born Justice Spigelman has rich experience in the field of corporate affairs, insurance, arbitration and international law.

According to the Production Sharing Contract (PSC) signed between the Government of India and Reliance Industries Ltd the Arbitration Tribunal must comprise three (3) arbitrators. Of these, contractor (RIL, BP and Niko) and the government of India are allowed to appoint one Arbitrator each, while the Third Arbitrator must be mutually appointed by both appointed arbitrators.

However, the two appointed arbitrators were unable to reach an agreement on the appointment of the Third Arbitrator and Reliance Industries had to approach the Supreme Court.

We would like to state that in January 2012 Reliance had recommended former Hon’ble Chief Justice Mr. S.P Bharucha as its nominee. Hon’ble Justice Mr. Bharucha was the Chief Justice of Supreme Court of India from 2001 to 2002 and is also former Chief Justice of Karnataka High Court.

Central government’s nominee Hon’ble Justice Mr. V. N. Khare too is a former Chief Justice of India having held the post from December 2002 to May 2004 and prior to that he was the Chief Justice of Calcutta High Court. With the constitution of the Arbitration Tribunal, the path has been cleared for a speedy resolution of various disputes relating to the KG D6 block.

The dispute arose when the recoverable gas from the field was found to be lesser than the initial estimates. Post this development, the central government had wrongfully sought to disallow recovery of full costs incurred by Reliance in the block. As a result Reliance was compelled to proceed with arbitration. But since there was no consensus on the appointment of the Third Arbitrator, Reliance had to approach the Supreme Court.

Both Reliance and the Government of India are bound by the PSC. According to the PSC, any dispute between the parties can be resolved only through the process of arbitration. We are hopeful that the constitution of the Arbitration Tribunal will silence the vested interest groups which are unreasonably raising this issue across the country.