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The central government has submitted before the Madras High Court that the dispute raised by Japanese auto-major Nissan against the Union of India under the Comprehensive Economic Partnership Agreement (CEPA) has to be heard by the Tribunal itself and the Government of Tamil Nadu has no locus to file a petition in the high court against the dispute in the International Tribunal.
This submission was made in a counter affidavit by the Centre on a petition filed by the Tamil Nadu government seeking an injunction against the International Tribunal, in Singapore, hearing a complaint raised by Nissan against India. The dispute is related to an alleged non-payment of tax incentives, on which Nissan has raised a claim of around Rs 50 billion with the International Tribunal. The state government argued that the dispute is pending with the Madras High Court and as per the agreement between the company and the state government, it has to be heard in the high court first.
In its counter affidavit, the central government said that the Government of India is fully prepared to litigate the issues pertaining to jurisdiction before the tribunal promptly, in full confidence that it would be positively received.
"The International Tribunal constituted under the CEPA must rule on its own jurisdiction and so, the objections to jurisdiction must only be raised before it," submitted the Centre in its affidavit. The Tamil Nadu government has an obligation to abide by the provisions of the CEPA and it does not have the locus to file an application praying that the international arbitration against the Government of India be injuncted since the state government is not a party to the CEPA.
A procedural hearing was conducted before the International Tribunal on December 14 and certain issues pertaining to the terms of appointment, procedural order and proposed timelines for the arbitration were discussed and the terms of appointment were broadly agreed to. The Tribunal would also be delivering a decision on the timelines that should be adopted and issuing a first procedural order shortly, it said.
According to legal sources, Nissan has also filed its counter affidavit with the high court. The company has informed the court that the next hearing of the International Tribunal is on February 23, 2018. The court adjourned the matter to the fourth week of January.
Nissan has argued that the International Tribunal itself is capable of deciding its jurisdiction and no anti-arbitration dispute is maintainable. It has also argued that the tax dispute and the international treaty arbitration have nothing to do with each other since the petitioner in the tax case in Tamil Nadu, which is the state government, is not the party in the international arbitration.
Nissan Motor has approached the International Arbitration Tribunal seeking around Rs 50 billion while invoking the CEPA treaty between India and Japan. The company has alleged that the Tamil Nadu government has not paid incentives to the tune of around Rs 29 billion, according to earlier reports.
Nissan sought payment of incentives due from the Tamil Nadu government as part of a 2008 agreement to set up a car manufacturing plant in the southern state. Tamil Nadu officials alleged that the agreement between Nissan and the state is to refund the incentives over 21 years but the company wants to get the accruals in a short period. The state government approached the high court seeking a stay on the arbitration proceedings, arguing that the company had to fight the dispute in the Madras High Court according to the MoU clause between the two parties.