RIL pushes for foreign arbitrator on KG-D6 gas fields

The Supreme Court Monday said it would hold hearing Jan 7, 2014, of whether the third arbitrator in the dispute between the government and Reliance Industries over the KG-D6 gas fields would be an Indian or a "neutral" foreigner, who will head the three-member panel of arbitrators.

The other two arbitrators are former Chief Justices S.P. Bharucha and V.N. Khare. While Justice Bharucha was nominated by the RIL, Justice Khare was nominated by the government.

The RIL had pressed for arbitration on the interpretation of the Production Sharing Contract (PSC), including the recovery of cost for developing the eastern offshore KG-D6 gas fields.

The dispute arose after the Director General of Hydrocarbons (DGH) said that there was a shortfall in the production of gas in the KG-D6 fields, as the operator RIL drilled only 18 of 31 wells.

Justice S.S. Nijjar, hearing the matter, fixed the date for the hearing of arguments as the court brushed aside the submission by Communist Party of India MP Gurudas Dasgupta and the NGO Common Cause, who contended that the court should proceed with the hearing only after their plea challenging the production sharing contract between the government and RIL, Niko and BP and other issues was decided.

Accepting the argument by senior counsel Harish Salve that the petitions by CPI Lok Sabha member Gurudas Dasgupta and the NGO Common Cause had no bearing on the hearing to decide whether the third arbitrator should be from within the country or an outside the country, Justice Nijjar said their plea had no bearing on the hearing under the Arbitration and Conciliation Act, 1996.

"I can't start hearing intervenors in 16(1) arbitration", Justice Nijjar said as senior counsel Colin Gonsalves, appearing for Dasgupta, and Prashant Bhushan, appearing for NGO Common Cause, sought time to mention their plea before the court of Chief Justice P. Sathasivam.

"This proceeding can't be stayed. But once arbitration is stayed, then it will go," Justice Nijjar said, as both Gonsalves and Bhushan recommended keeping the hearing on hold, as the matter involved the natural wealth which belonged to the people.

Salve, who appeared for RIL, said that earlier Gonsalaves had said that it was the government which was creating obstacles in the way of arbitration, but later made a 180-degree turnaround, and is now opposing it.

Rejecting the government's contention opposing a foreign arbitrator on the grounds that the dispute was between RIL and government, as BP and Niko were not operating the KG-D6 fields, RIL said that Niko was party to the PSC right from the beginning, and the government, after a thorough inquiry, had consented to the participation of BP in the PSC.

Pressing its plea that the presiding arbitrator should be from a neutral jurisdiction and not India, the RIL, in its rejoinder affidavit, said that the concept of PSC is foreign in origin and merely because the PSC is governed by Indian laws, it does not mean that Indian lawyers are uniquely qualified to act as arbitrators or that arbitrators from other jurisdictions should be disqualified.