Dabhol gets messier as US sues India in The Hague

Vol 8, PW 18 (01 Dec 04) Midstream & Downstream

Efforts to revive the defunct Dabhol power project are looking bleaker by the day.

The US governments powerful political risk insurer Overseas Private Investment Corporation (OPIC) has decided to end its cooperation with India for resolution of the Dabhol quagmire. On 4th November, the newly elected Bush administration launched legal proceedings on behalf of OPIC against the Indian government in the Permanent Court of International Arbitration at The Hague in Holland, naming Prime Minister Manmohan Singh as the sole respondent.

In its 20-page deposition, the US State Department holds the Indian government solely responsible for destroying the $3bn Dabhol power project. The actions and omissions of the Government of India, directly and through its subdivisions, agencies and instrumentalities, including the government of Maharashtra, MSEB, Maharashtra Electricity Regulatory Commission, Maharashtra Power Development Corporation and Indian courts had the effect of depriving Dabhol Power Company and its investors and lenders of rights, interest, use, benefits and control on their investments.

Among others, the US State Department accuses the Indian government of preventing DPC from: Earning revenues Drawing on an escrow account and a letter of credit Collecting (dues) from the Government of Maharashtra or the Government of India under their guarantees Terminating its involvement in the project and receiving the previously agreed buy-out payment Seeking redress for the governments breaches of the project agreements in neutral international arbitral proceedings outside Indian courts Convening board of directors meeting or otherwise operating or taking action as a corporate entity Controlling its assets, accounts, records or even the project site itself This series of actions or omissions, individually or when viewed cumulatively, destroyed DPCs ability to operate, said State Department legal advisor Mark Clodfelter. The GOI is responsible under established principles of public international law for the injuries sustained by OPIC as a result of these actions and omissions by or attributable to the government of India.