International investment treaty implications for the Indian position on nuclear liability

Abstract

With foreign corporations setting up nuclear reactors in India and the increasing likelihood of greater foreign direct investment in the nuclear energy sector, the threat of foreign investor claims against India’s nuclear-related policies is a real one. For instance, Russia’s most recent attempt to seek liability waiver under the Civil Liability for Nuclear Damage Act, 2010 could unravel a string of problems for India if viewed from an investment lens, thus making it crucial to assess the implications of India’s investment treaties for its nuclear law and policy. This paper aims to provide an understanding of the opportunities and pitfalls that India’s investment treaties present for its domestic nuclear-related policies and regulatory action. In doing so, the paper will analyze the core principles of international investment law and policy and the latest case developments, which includes 2011’s controversial Vattenfall arbitration against Germany’s decision to phase out nuclear energy, the first known nuclear-related investor-state arbitration. This paper makes the first attempt to outline why India’s present position on nuclear liability leaves it vulnerable to investor challenge under its various investment treaty commitments.

Keywords:

• investment treaties
• nuclear energy
• nuclear liability
• India

Notes

1. By the end of 2011, the total number of known investor-State dispute settlement cases had reached 450. In 2011, at least 46 treaty-based disputes were filed – the highest number of known treaty-based disputes ever filed in one year (UNCTAD 2012b).

2. White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award dated 30 November 2011.

3. Investment treaties, for the purposes of this paper will be defined as comprising of bilateral investment treaties (BITs), investment chapters in free trade agreements (FTAs) and regional investment agreements. The focus of this paper is on investment treaties, the most common form of which are BITs. More recently, investment treaties can be seen as chapters in various FTAs, which include provisions similar to the BITs. Investment treaties also take the form of regional investment treaties such as the ones covering the Common Market for Eastern and Southern Africa (COMESA) and the Association of Southeast Asian Nations (ASEAN).

4. Common Cause and ors. v. Union of India and ors., Writ Petition (Civil) No. 464 of 2011 before the Supreme Court of India.

5. Centre for Public Interest Litigation and ors. v. Union of India, Writ Petition (Civil) No. 407 of 2012 before the Supreme Court of India.

6. Article 1.4.

7. Article 1.2.

8. Article 1.1.

9. Article 1.1.

10. Article 1(c).

11. Article 10.1, Chapter 10.

12. Salini Costruttori SpA v. Morocco, ICSID Case No. ARB/00/4 (2001).

13. Saluka Investments BV v. Czech Republic, UNCITRAL, Partial Award dated 17 March 2006 at para. 302.

14. GAMI Investments GAMI Investments, Inc v. United Mexican States, UNCITRAL (NAFTA) Final Award dated 15 November 2004 at para. 94.

15. Saluka Investments BV v. Czech Republic, UNCITRAL, Partial Award dated 17 March 2006 at para. 305.

16. See RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. Arb. V079/2005 (2010); Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17 (2011).

17. Such as not extending any treatment, preferences or privileges arising from (a) customs union, economic union or a free trade agreement; (b) the provisions of a double taxation agreement; and (c) any legislation relating wholly or mainly to taxation. Article 4.4 of India-Australia BIT.

18. Article 15 – Prohibitions and restrictions: ‘Nothing in this Agreement precludes the host Contracting Party from taking, in accordance with its laws applied reasonably and on a non discriminatory basis, measures necessary for the protection of its own essential security interests or for the prevention of diseases or pests.’

19. Compania de Aguas del Aconquija v. Argentine Republic, ICSID Case No. ARB/97/3 (2007).

20. Methanex Corporation v. United States of America, UNCITRAL (NAFTA) Final Award dated 3 August 2005.