Tata Sons files evidence in English High Court challenging the enforcement of $1.17 billion arbitration award

Tata Sons Limited filed evidence in support of its September 5 application to the English High Court of Justice, challenging the enforcement of a $1.17 billion LCIA (London Court of International Arbitration) award in favour of the Japanese telecom giant NTT Docomo on Friday.

The English court had on July 25 passed an ex-parte order in favour of NTT DoCoMo, allowing the company to realise the amount of the award against Tata's assets in the UK, subject to Tata Sons contesting the adjudication.

The June 22 LCIA award is the fallout of the failed Tata Teleservices joint venture (JV) between the two companies, in which DoCoMo holds a 26 per cent stake. According to the terms of the initial agreement, the Japanese company was allowed an exit option under which Tata Sons (or an external buyer that the company was to arrange) was to purchase the DoCoMo stake at a predetermined price.

After the JV failed in generating the desired returns, DoCoMo decided to exercise the exit option at a time when the share price of the JV had dropped significantly below of the agreed upon price. Unable to find an external buyer, Tata made an application to the Reserve Bank of India (RBI) to purchase the DoCoMo stake themselves. The RBI denied the request, citing existent financial regulations that disallowed subsequent transfers at predetermined prices.

As a result, Tata Sons was unable to purchase the DoCoMo's holding in the JV as per the agreement, leading to the international arbitral proceedings and the $1.17 billion arbitration award thereafter.

Tata's evidence in the English court outlines the grounds on which the enforcement of the award will be resisted. Firstly, that DoCoMo has not validly tendered its shares in the JV, which is a necessary condition precedent to payment Tata paying the sum awarded by the arbitral tribunal. Secondly, that performance of the award without approval by the Reserve Bank of India (RBI) would be illegal under Indian law and/or contrary to public policy.

According to a Tata Sons spokesperson, the company is following the path laid down by the arbitral tribunal in the award. "The arbitral tribunal, with Docomo's encouragement, expressly left open the issue of whether performance of the award would require approval from the RBI. Tata sought such approval and was refused. Accordingly, Tata Sons' actions do not, in any manner, detract from its stated commitment to discharge its obligations to the fullest extent permitted under law," said the company spokesperson.

DoCoMo has also filed a separate enforcement application in the Delhi High Court, in relation to the award. Though Tata is challenging these proceedings as well, it has nonetheless deposited the full sum of the arbitral determination (Rs 8,450 crore) with the registrar of the high court, subject to final adjudication in the matter.