Tamil Nadu Government Seeks Stay On Nissan’s International Arbitration

The Tamil Nadu state government has filed a petition in the Madras High Court seeking an interim stay on Japanese carmaker, Nissan Motor, from proceeding with international arbitration over alleged non-payment of incentives. Nissan has claimed that the state government owes it $770 million as unpaid incentives.

According to the petition, the basis behind the demand for stay is the state government’s claim that Nissan had invoked a clause under the Comprehensive Economic Partnership Agreement (CEPA) between India and Japan.

In the petition presented before the court, the government reportedly said, “The 2nd respondent [Nissan], as a disputed investor, has approached international arbitration without reference to the above clause. Admittedly, the 2nd respondent has challenged the amended provisions before the Madras High Court, which is pending adjudication and is now estopped from raising the same dispute before the international arbitration which is expressly prohibited under Article 96 (6) of the CEPA.”

Article 96(6) of CEPA  states that no investment dispute may be submitted to international conciliation or arbitration referred if the disputing investor has initiated any proceedings for the resolution of the investment dispute before courts of justice or administrative tribunals or agencies.

The government added, “The entire proceedings are in violation of principles of natural justice and in violation of the United Nations Commission on International Trade Law.”

The Tamil Nadu government has voiced concerns about the load that the state has to bear due to the payment of incentives that span over a period of five years which were scheduled to be paid within 21 years. Additionally, the government has also pointed out that if Nissan-Renault call quits on the project after the incentive payment, it will be unable to achieve substantial economic growth targets which were assumed at the time of signing the memorandum of understanding.

The central government also added that if the international court gives a decision against India, then the state government will have to pay Nissan a huge sum without presenting its case in the international court.
According to The Hindu, the Madras HC has already served a notice to the Japanese manufacturer.

We think this case has built up a new problem of projecting India as a foreign investment destination for international investors.

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