Tamil Nadu govt moves Madras HC for stay on Nissan arbitration

Nissan issued notice to Centre, seeking to recover around Rs 5,000 cr of incentives along with interest and damages

The Tamil Nadu government has moved the Madras High Court seeking to restrain Nissan from proceeding with international arbitration over Rs 5,000 crore of unpaid incentives and damages. 

The state government has argued that the Japanese carmaker should have first taken the matter to local courts. It also claimed the Union government could not be made a party to this dispute. 

Nissan has issued a notice to the Centre, seeking to recover around Rs 5,000 crore of incentives promised by the Tamil Nadu government along with interest and damages. The company has initiated international arbitration proceedings against the Centre to this effect. 

Narmadha Sampath, a special government pleader in the Madras High Court, confirmed the development and said the matter came up in court on Monday. The court accorded permission to issue private notices to the parties in the petition. The advocate representing Nissan received the notice, she said.

“They (Nissan) have made a wrong party and have not revealed the particular clause in the agreement that they are subjecting to arbitration. They have suppressed that information and have also wrongfully made the Union of India a respondent,” Sampath pointed out. 

The Tamil Nadu industries department has argued the terms of the state government’s agreement subjected Nissan to the Arbitration Act, 1996. “Our argument is Nissan is bound by those terms and now cannot invoke the jurisdiction of an international court,” she said.

The company’s counsel who appeared in court confirmed Nissan had opposed grant of stay on arbitration. An executive from Nissan, who is close to the development, said, “We are asking the Indian government to uphold the commitments it made in the India Japan Comprehensive Economic Partnership Agreement. Under that treaty, we are entitled to (go to) arbitration. We have taken the action as a last resort and are committed to working with the government towards a resolution.”

In its petition, the Tamil Nadu industries department has sought an injunction restraining Nissan from proceeding further with international arbitration with the Centre pursuant to the 2011 Comprehensive Economic Partnership Agreement between Japan and India.

Nissan has sought payment of incentives from the Tamil Nadu government as part of a 2008 agreement to set up a car manufacturing plant in the state. The agreement between Nissan and the state is to refund the incentives over 21 years, but the company is seeking a shortened payout period, according to an official. 

“We have also told the court that commercial taxation-related issues and sovereign issues are not discussed in the Comprehensive Economic Partnership Agreement. We are trying to bring to the notice of the court that they (Nissan) are taking a wrong plea. Before going to the international court, they need to seek remedies available in the memorandum of understanding with the Tamil Nadu government,” an official said.