Billion Dollar Satellite Dispute Rages on a Decade After it Began

Mark Giddings and Sophie Howe

The dispute between the privately held Devas and the Indian Government owned Antrix over a satellite deal gone wrong makes for compelling drama. Ten years after the dispute began, and after numerous arbitral awards and court actions sprawling across multiple jurisdictions, the shareholders of Devas are still locked in a battle to recover US$1.3 billion under an arbitral award. The dispute, which has caught the attention of both litigators and those working within the space industry, is of significant interest for a number reasons.

To begin with, there is the nature of the underlying deal: an agreement for Antrix, the marketing arm of the Indian Department of Space, to operate two satellites and lease transponder capacity in the S-band to Devas for delivery of digital broadcasting services throughout India. The deal was criticised for seemingly giving away valuable S-band spectrum at an undervalue through an opaque process. Within India, it was likened to an earlier scandal in which the Minister for Telecommunications was alleged to have undervalued 2G spectrum and sold it to favoured companies.

Then there is the dispute itself, which arose when the Indian Government made a policy decision, ostensibly for reasons of national security, not to provide S-band to Antrix for commercial activities, including those which were the subject of existing agreements. Shortly after, Antrix served notification of the annulment of the agreement on Devas. In this regard the dispute offers a lesson on the risks that can arise for private companies when contracting with State owned entities. These risks extend beyond obvious commercial considerations to include risks from changes to regulatory regimes, government policy and political priorities.

The annulment prompted Devas to commence Indian-seated arbitral proceedings under International Chamber of Commerce (ICC) rules.[1] Devas claimed that Antrix had no entitlement to terminate and had wrongfully repudiated its obligations by purporting to do so. Antrix declined to respond to the ICC’s request to appoint an arbitrator and instead challenged the jurisdiction of the tribunal. Antrix argued that the arbitration clause was pathological because it referred to both ICC and UNCITRAL rules and that there could be no arbitration unless the parties agreed on which rules applied, which they had not. The tribunal, ruling against Antrix’s jurisdictional challenge, held that whichever party commenced arbitration was entitled to choose the applicable rules.[2]

Devas’ success on the merits

In an award rendered on 14 September 2015, the tribunal dismissed each of Antrix’s justifications for termination. It found there was no impediment to Antrix obtaining frequency or orbital clearance from relevant agencies that would have given rise to a contractual right for Antrix to terminate.[3] Additionally, although there was a force majeure clause in the contract that applied in relation to governmental acts, because Antrix had not taken reasonable steps within its power to prevent or mitigate the effect of the Indian Government’s policy decision, Antrix could not rely on that clause.[4]

The tribunal also held that Antrix could not rely on a statutory provision of Indian law to terminate for frustration, because the provision did not apply where the parties had expressly addressed the possibility of a supervening event in their contract through a force majeure clause.[5] Accordingly, the tribunal found that Antrix’s annulment was a repudiation of the contract and ordered Antrix to pay USD$562.5 million (plus interest) to Devas.[6]

In addition to the ICC arbitration pursuant to the agreement, Devas’ shareholders pursued two sets of investment arbitrations under bilateral investment treaties between India and Mauritius,[7] and between India and Germany.[8] In each instance the tribunals found in favour of the applicant shareholders and awarded compensation in excess of USD$100 million.

Efforts to confirm and enforce the ICC award

Devas has taken steps to have the ICC award recognised and enforced in France, the United States and the United Kingdom, among other jurisdictions. One of the appeals of international arbitration in the international commercial space industry is the portability of awards under New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. However, having lost on the merits of the ICC arbitration, the Indian Government has been engaged in a protracted effort to protect its assets.

In 2018, Devas obtained confirmation of the award from the Paris Court of Appeal, but this was subsequently challenged by Antrix on the ground that the arbitral tribunal had been irregularly constituted. In 2020, the French Supreme Court ruled that the challenge was not being raised out of time because Antrix’s earlier challenge to the tribunal’s jurisdiction had necessarily included a challenge to its constitution.[9] The matter was remanded to the Paris Court of Appeal for determination, where it is now pending.

In October 2020, a United States District Court for the Western District of Washington confirmed the ICC award.[10] The District Court dismissed Antrix’s challenge to the constitution of the tribunal, holding that where a party has notice of its duty to appoint an arbitrator and fails to do so the court will still enforce the award. The District Court also dismissed Antrix’s allegation of fraud, finding instead that Antrix had not cited any facts showing that the agreement was the product of corruption. On 4 November 2020, judgment was entered against Antrix for the full amount of the USD$562.5 million award, which together with interest totalled USD$1.293 billion.[11] Antrix has filed an appeal against the decision to the United States Court of Appeals for the Ninth Circuit.

Challenges to the ICC award in India

In 2016, India’s Central Bureau of Investigation filed charges against Indian officials involved with Antrix for an alleged conspiracy to defraud. More recently, in November 2020, India’s Attorney General rejected the possibility of any settlement of the award, stating that authorities had “discovered a serious fraud in the entire series of transactions leading up to the disputes including the arbitration agreement.”[12]

At the same time, the Indian Government amended the Arbitration and Conciliation Act, 1996 to empower Indian courts to grant an unconditional stay on enforcement of an arbitral award passed in Indian-seated arbitration proceedings if the court is satisfied that there is a prima facie case that the arbitration agreement, the contract on which the award is based, or the arbitral award itself, was induced or effected by fraud or corruption. The Supreme Court of India recently ruled the ICC award should be kept in abeyance until the Delhi High Court decides on an application on a permanent stay.[13]

In January 2021, Antrix filed a petition with the Indian National Company Law Tribunal to wind up the Indian incorporated Devas on the basis of fraud and illegality. The Company Law Tribunal granted the petition and appointed a provisional liquidator over Devas, having found that:[14]

The incorporation of Devas itself was with fraudulent motive and unlawful object to collude and connive with then officials of Antrix and to misuse/abuse process of law, to bring money into India and to divert it under dubious methods to foreign countries

Shareholders of Devas attempted to block the winding up, but their petition was denied on the basis that it “amounts to an abuse of process of law and a proxy war on behalf of Devas” and the petitioners were issued with a fine.[15] In May 2021, Devas was placed into final liquidation and the liquidator was directed to “take expeditious steps to liquidate the Company in order to prevent it perpetuating its fraudulent activities and abusing the process of law in enforcing the ICC Award”.[16]

An appeal by Devas against the liquidation order was dismissed in September 2021.[17] Devas’ shareholders have also sought to preserve and protect enforcement proceedings around the world, including by seeking injunctions against Antrix and post judgment orders for discovery.

Consideration

With no end in sight to the dispute, it appears that Antrix will continue to resist enforcement and the shareholders of Devas will continue to pursue the commercial assets of the Indian Government.[18]

The ongoing dispute emphasises why international arbitration is an important mechanism for resolving cross border disputes in the space industry. Indeed, in a recent survey, over 50% of respondents from the space industry said that they always included an arbitration clause in their contracts.[19]

One key benefit is the ability to avoid litigating disputes in the local courts. The Devas dispute demonstrates why a private company might consider this particularly desirable where the counterparty is a State owned entity. Even though the Devas agreement was governed by Indian law and the seat of the arbitration was India, Devas benefited from having its claim determined by independent arbitrators.

Another important benefit is the portability of awards. Notwithstanding the efforts of the Indian government, Devas and its shareholders have been able to pursue judgments from courts in other jurisdictions in which there are Indian Government assets to satisfy the award. However, as the dispute illustrates, there is no guarantee that recognition and enforcement of an arbitral award against a State owned entity will be straightforward. Moreover, the Devas dispute reinforces the importance of clarity in the drafting of arbitration clauses to avoid challenges to the jurisdiction or constitution of the tribunal.

[1] Devas Multimedia Private Limited v Antrix Corporation Limited (Final Award, International Chamber of Commerce (ICC), Case No 18051/CYK, 14 September 2015) (ICC Award).

[2] ICC Award at [151] to [160].

[3] ICC Award at [172] to [192].

[4] ICC Award at [235] to [236].

[5] ICC Award at [239] to [248].

[6] ICC Award at [401].

[7] CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v Republic of India (Permanent Court of Arbitration, Case No 2013-09).

[8] Deutsche Telekom AG v The Republic of India (Permanent Court of Arbitration, Case No 2014-10).

[9] Société ANTRIX CORPORATION LIMITED c/ Société DEVAS MULTIMEDIA PRIVATE LIMITED, Cour de cassation, chambre civile 1, N° F 18-22.019 (4 March 2020).

[10] Devas Multimedia Private Ltd. v Antrix Corp. Ltd. (United States District Court, WD Wash, C18-1360 TSZ, 27 October 2020).

[11] Devas Multimedia Private Ltd. v Antrix Corp. Ltd. (United States District Court, WD Wash, C18-1360 TSZ, 4 November 2020).

[12] ‘Devas joins Cairn Energy in trying to seize Air India’s overseas assets’, Business Standard (online, 30 June 2021).

[13] Devas Multimedia Private Limited v Antrix Corporation Limited, IA No 107899/2020, 4 November 2020 (Supreme Court of India).

[14] ‘Antrix deal: NCLT orders winding up of Devas for indulging in ‘fraudulent activities’’, Times of India (online, 31 May 2021).

[15] Devas Employees Mauritius Private Limited & Ors v Union of India, Antrix Corporation Ltd, and Devas Multimedia Pvt Ltd (in provisional liquidation), WP No 6191/2021, 28 April 2021 (High Court of Karnataka at Bengaluru, India).

[16] Antrix Corporation Ltd v Devas Multimedia Pvt Ltd, CP No 06/BB/2021, 25 May 2021 (National Company Law Tribunal Bengaluru Bench).

[17] ‘NCLAT dismisses Devas Multimedia’s plea against its winding up’, The Economic Times (online, 8 September 2021).

[18] ‘Devas Multimedia eyeing foreign assets of Indian govt to enforce $1.3bn arbitral award’, The Economic Times (online, 19 October 2021).

[19] Viva Dadwal and Eytan Tepper, ‘Arbitration of Space-related Disputes: A Survey of Industry Practices and Future Needs’ (Conference Paper, International Astronautical Congress, 21-25 October 2019).

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