The Indian government has, in the years following the case of White Industries (2011), found itself entangled in more than 15 investment treaty arbitration (ITA) cases filed by several foreign investors, under various bilateral investment treaties (BITs). According to the data available with the UNCTAD, in 2016 and 2017, a total of seven new cases have been filed against India, which include cases filed by Vodafone (UK), Nissan (Japan), and Ras al Khaimah Investment Authority (UAE) among others.
ITA cases under various BITs involve disputes concerning the exercise of sovereign power by the host state. However, very little official information related to ITA cases comes in the public domain in India. The only sources are the news reports. If one were to check the website of the Ministry of Finance, information about the ITA cases involving India, i.e. why were these claims made, what was the amount of damages claimed and awarded by the BIT tribunal etc., is conspicuously absent.
This is in contrast with the practice of other states such as the US or Canada, which have a section on their government websites dedicated to information relating to ITA cases which they are party to. As a result, in India, the Right to Information Act, 2005, remains the only option through which a citizen can seek credible information related to ITA cases. However, exceptions contained in the RTI Act have consistently been used by authorities to deny the disclosure of information concerning ITA cases. This piece, therefore, analyses the appropriateness of such non-disclosures based on the exception contained under the RTI Act.
ITA cases and the right to information
In pursuit of information concerning the case of RAKIA v India, the author filed an RTI request with the Ministry of Mines, seeking the notice of arbitration sent by RAKIA to the government of India under the India-UAE BIT, and the information as to whether an arbitral tribunal has been constituted or not. The aforesaid ITA case arises from the cancellation of a memorandum of understanding (MoU) between the government of Andhra Pradesh and RAKIA to supply bauxite to AnRak Aluminum Limited in which the latter has 13% shareholding, apparently due to the concerns of environment as well as tribal population.
In reply to this request, the sought information was denied on the grounds contained in section 8(1)(a) of the RTI Act. The denial was upheld in the first appeal. The second appeal is at present pending with the CIC. A similar RTI request was filed a few years ago seeking the ‘notice of arbitration’ in the case of Vodafone v Union of India, only to meet a similar fate. Thus, it becomes relevant to analyse whether section 8(1)(a) of the RTI Act exempts the dissemination of the documents related to ITA cases such as notice of arbitration, and the status of arbitration i.e. questions such as whether or not arbitral tribunal has been constituted. To that end, it is important first of all to enquire into the nature of an ITA case.
Exercise of sovereign power
Most of the BITs, provide for ITA as a method of dispute resolution, through which a foreign investor can challenge the conduct of the host state which it considers to be in violation of the obligations undertaken by latter under that BIT, before an international arbitration tribunal. ITA is concerned with the exercise of sovereign power by the host state. For instance, the subject matter of ongoing ITA dispute between Vodafone and India under the India-UK BIT and the India-Netherlands BIT, retrospective imposition of capital gains tax on Vodafone India by way of Finance (Amendment) Act 2012, is a sovereign legislative act.
Similarly, the ITA cases filed by Cairn Energy and Vedanta against India are related to taxation which again is a sovereign function. Further, the cancellation of 2G spectrum licences – a sovereign act by the apex judicial body, has also led to filing of ITA cases. Thus, it is to be seen that generally the ITA cases arise out the exercise of sovereign of the State. However, in some cases, even a contractual dispute between a host state acting in private/commercial capacity and a foreign investor arising purely out of an investment contract, can be elevated as treaty dispute in form of ITA case, if the relevant BIT provides as such.
Impact on public interests and public money
The ITA cases dealing with the exercise of sovereign power, may relate to important public interest concerns such as public health, environment, human rights etc. For instance, Philip Morris filed ITA cases against Australia and Uruguay when they sought to implement anti-tobacco measures to protect the health of their citizens. Fortunately, in both the cases, states emerged unscathed. Thus, there are chances that even genuine sovereign measures to promote public interests, can be challenged under ITA cases, as is apparently the case in RAKIA v India, where the MoU was cancelled owing to environmental and tribal concerns.
Further, the damages claimed by the foreign investors in such cases are huge. RAKIA has claimed $44 million in damages which roughly amounts to about Rs 314 crore. Similarly, after India lost the Antrix-Devas dispute, it is required to pay a staggering amount of Rs 4,432 crore as compensation. Just to contextualise, it is pertinent to note that the Parliamentary Standing Committee on Health and Family Welfare in March 2018 in its report, highlighted that there was a shortfall of Rs 4,752.71 crore in budget allocation in 2018, which could adversely impact certain health programs.
If one adds the aforementioned amounts paid as compensation to the foreign investors, it is almost equal to the shortfall in budget as highlighted by the Committee. Thus, it is not far-fetched to assume that money which the government might end up paying as compensation to foreign investors (given the long list of ITA cases filed against it) could be invested for the benefit of the public. Thus, it is ultimately the hard-earned money of the taxpayers of this country which is at stake.
In a democracy it is imperative that any act of the state and any challenge by a private entity which may possibly have an adverse impact either on public money, or public interest, must be brought to the knowledge of taxpaying citizens of the country. In this context, the question that arises is – when an ITA case such as RAKIA v India deals with exercise of sovereign power, and may possibly entail pecuniary liability for India, is withholding information by applying section 8(1)(a) of the RTI Act justified?
Information pertaining ITA cases and economic interest
Section 8(1)(a) of the RTI Act provides that citizens may be denied access to information sought if such information prejudicially affects sovereignty and integrity of India, the security, strategic, scientific or economic interests of the state, relation with foreign state or lead to incitement of an offence. The RTI request mentioned above sought ‘notice of arbitration’ from the Ministry of Mines which is a document which merely elucidates the claim of the foreign investor and the grounds on which such claim is based. The only ground under section 8(1)(a) which possibly could justify such denial is that of ‘economic interest’. The Supreme Court of India in the case of Reserve Bank of India v Jayantilal N. Mistry (2015), in relation to ‘economic interest’ u/s 8(1)(a) of RTI Act observed:
It (economic interest) includes in its ambit a wide range of economic transactions or economic activities necessary and beneficial to attain the goals of a nation, which definitely includes as an objective economic empowerment of its citizens. It has been recognized and understood without any doubt now that one of the tools to attain this goal is to make information available to people. Because an informed citizen has the capacity to reasoned action and also to evaluate the actions of the legislature and executives, which is very important in a participative democracy and this will serve the nation’s interest better which as stated above also includes its economic interests.
However, the Supreme Court also acknowledged that “disclosure of information about currency or exchange rates, interest rates, taxes, the regulation or supervision of banking, insurance and other financial institutions, proposals for expenditure or borrowing and foreign investment could in some cases harm the national economy, particularly if released prematurely.”
In view of the Supreme Court’s observation, it seems unlikely and far-fetched to exempt a ‘notice of arbitration’ from the purview of RTI request. Despite the fact that an ITA case always arises out of a foreign investment made in India which undoubtedly is an economic issue, it needs to be viewed differently. Since ITA cases involve the exercise of the sovereign power of the state, and implications for both public interest and the public money, it is only in the larger interest of the public to disclose such information. Rather, the disclosure of such information would only amount to economic empowerment of the citizens which the Supreme Court considers an aspect of ‘economic interest’ of the country. The transmission of such information into public domain, would only enable the citizens to evaluate the exercise of the sovereign power by the state, in respect of the foreign investments in the country.
If one compares the purely domestic law scenario where the exercise of sovereign power by the state is challenged in the courts of law, one can easily access the information, as transparency is an inherent feature of courts under the domestic legal system. For instance, when the Indian government moved to the Delhi high court seeking to restrain Vodafone from initiating a second ITA case under the India-UK BIT, the decision rendered by the high court was publicly available and shed light on several aspects of the case which were hitherto unknown.
It is also important to keep it in mind, that had it not been for the BITs, these cases would have been heard by the domestic courts and such information about the exercise of sovereign power by the state in regulating foreign investments, could not be stonewalled.
Official position of India on transparency in ITA
India in its new Model BIT also has a provision concerning transparency in ITA – article 32, which provides that the documents such as the notice of dispute, notice of arbitration, pleadings and written submissions, transcripts of hearings, decisions, awards, and orders of the ITA tribunal shall be made available by the host state, subject to the applicable law relating to protection of confidential information.
As we have seen and argued above, the exception contained in section 8(1)(a) of the RTI Act cannot be applied to keep the aforementioned documents confidential. As such, the denial of information related to ITA, by the government, is in contradiction with India’s official position on transparency in ITA reflected by the Model BIT. The government of India must understand that, merely providing the information regarding notice of arbitration, to its public does not amount to accepting the claims of the foreign investor. Canada provides us with a model that the Indian government must think of following. The official website of the Canadian government presents following information to the public, with a disclaimer at the end of the page:
The information on this website is provided for transparency purposes only and is without prejudice to Canada’s legal position on these cases. It is understood that the posting of one or several proceedings on this website does not mean that a claim has been properly submitted to arbitration or that arbitration has been validly initiated under Section B of Chapter 11 of the NAFTA.
Disclosure of information related to ITA cases shall only ensure the most fundamental aspect of a participative democracy where the citizens hold the government accountable for the exercise of its sovereign power. However, as things stand today, any attempt at seeking information about ITA cases is thwarted by application of Section 8(1)(a) of the RTI Act.
Pushkar Anand is assistant professor at Faculty of Law, University of Delhi, New Delhi. He can be reached at firstname.lastname@example.org.