A 15-year agreement between India and Britain that assures equitable treatment to cross-border investors from both countries may technically permit Vedanta to seek legal action against the central government if its investments in Orissa suffer for no fault of the British company.
Vedanta, which has invested about Rs 45,000 crore in various mineral refining projects in Orissa, is finding raw material supplies to its alumina refinery in Kalahandi (Orissa) uncertain after the central government decided not to allow Orissa Mining Corporation – with which Vedanta has a raw material supply pact - to extract bauxite from the nearby Niyamgiri Hill reserve last week.
Why not Polavaram?
Legal experts who support the view say that under the Indo-UK Bilateral Investment Promotion and Protection Agreement (BIPA), operational since 1995, Vedanta can question the government move to deny raw material to its bauxite refinery in Orissa if it ignores the same provisions in the law that were held against bauxite mining to give environmental clearance for another eco-sensitive hydel project in Polavaram, Andhra Pradesh.
“The company can technically sue Indian government under BIPA. The denial of raw material to Vedanta’s bauxite refinery, while allowing another state to flout the same rules and go ahead with a project is against the ‘fair and equitable’ treatment ensured under the agreement,” said Prabhash Ranjan, assistant professor, National University of Juridical Sciences, Kolkata.
Ranjan also said there were compensation provisions under BIPA for losses incurred by companies such as Vedanta, if they were not able to function due to civil disturbances after making huge investments.
A Vedanta spokesperson said the company’s agreement was with Orissa Mining Corporation and not the central government. “The mining leases were sought by the Orissa Mining Corporation. Our contract only talks about supply of raw material for running the refinery,” he said.
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Ranjan said BIPA is relevant even if the mining licenses were not given to Vedanta, since “as an investor, the British firm was assured of raw material supply”.
‘Doesn’t apply’
However, not all agree. “As a principle, any BIT (bilateral investment treaties) or investment agreement protects the legitimate expectations of the overseas investor. However, it never gives a blanket approval for projects which an investor seeks to undertake. The investor has a legitimate right to seek legal remedy if a project which has commenced after receiving necessary approvals is arbitrarily revoked. However, it cannot be the same where an entity is yet to get the final approval or its in-principle approval gets rejected,” said Anuradha R V, partner, Clarus Law Associates.
The allegations of differential approach by the central government came up after the Polavaram project received environmental ministry approval despite complaints of violation of the Forest Rights Act, the same law under which Niyamgiri mining got stuck.
The Orissa government, which found its tax resource opportunities dwindle due to the central government decision on Niyamgiri, has moved the Supreme Court against Polavaram, as it will submerge several villages and forest land in several states, including Orissa.