Nissan-TN row: Global tribunal asks govt to seek deferral of HC proceedings

Nissan has invoked CEPA clause against India, seeking to recover around Rs 5,000 cr of incentives promised by Tamil Nadu govt

An International Arbitration Tribunal on Wednesday directed the Government of India (GOI) to seek deferment of any ruling from the ongoing Madras High Court proceedings in a petition by the Tamil Nadu government on a tax incentive dispute between the state and Nissan Motor.

When the matter came for hearing at the HC on Thursday, the GOI sought more time to give its statement on the issue. The court adjourned the matter.

Nissan approached the global tribunal soon after the state government went to the HC earlier this week. The government sought an order restricting Nissan from invoking the Comprehensive Economic Partnership Agreement (CEPA) between India and Japan as a remedy to its dispute with the state.

The company sought an emergency interim order from the tribunal, directing India and its entities, including the TN government, to seek a temporary stay of the HC proceedings, till a further order of the tribunal. It also sought an order that the GOI or its entities take no action of any kind that might aggravate or extend the dispute as submitted to the tribunal.

The arbitral tribunal of Kaj Hober, Jagdish Singh Khehar and Jean E Kalicki issued an order directing both parties to take necessary steps to seek a deferment of any ruling at the HC on the state government's pending request for an anti-arbitration injunction. This is "at least until such times as the tribunal first resolves, as a preliminary question, any objections to its jurisdiction that India in due course presents".

However, the tribunal denied Nissan's request for an open-ended order in addition that India does not take any other action to aggravate the dispute.

GOI's preliminary response to the tribunal has been that it is not a party to the earlier agreement between Nissan Motor and the state government. It had earlier sought to shift the seat of the arbitration from Singapore to London.

G Rajagopalan, the Union additional solicitor general, told the HC on Thursday that India also argued in line with the state government's stand that tax-related issues will not come under the CEPA purview.

However, he sought time for the central government to give an additional counter at the HC. It also plans to file a detailed response to the tribunal on Nissan's application in next two weeks. Renault (partner of Nissan) told the HC it would file a counter-argument by then.

The tribunal's order on Wednesday said, "Interference with a party's right to pursue a CEPA arbitration, including the right to obtain a hearing from a CEPA tribunal on threshold jurisdictional issues, by definition would impose harm that is not adequately reparable by an award of damages."

Nissan has invoked the CEPA clauses against India, seeking to recover around Rs 5,000 crore of incentives promised by the Tamil Nadu government, along with interest and damages, allegedly in line with an agreement signed between both parties in 2008. By which a consortium of Renault and Nissan agreed 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, argued the state government.