Michael Hudson McHugh, a former judge in Australia’s High Court (The Highest Court in Australia) has been appointed as the head of a three member arbitral panel which is going to adjudicate in the on-going Reliance Industries Limited (RIL) & Govt. of India gas dispute.
The center of this dispute stems from the production-sharing contract (PSC) that RIL had assigned when the acquired the rights to extract gas from the KG-D6 basin. The Directorate General of Hydrocarbons (DGH) the controlling body of all gas and petroleum resources in India along with the Government of India is disputing whether to impose penalties on RIL for under-production. RIL for its part is likely to challenge various actions of the government before the arbitration panel, such as what the company describes as forced relinquishment of certain parts of the KG D6 block, which is at the heart of the dispute. RIL also plans to ask the arbitral panel to order market-based pricing, which the PSC promises but the government has blocked according to the company’s reading of the contract.
On the legal front, RIL is represented by one of India’s most eminent lawyers, Harish Salve. Mr. Salve has argued before India’s highest court of law, the Supreme Court that RIL may seek compensation and damages from the government for alleged acts of omission and commission by the state.
However, the entire arbitration proceeding is delayed by a PIL that was filed independently against RIL regarding gas prices. RIL has concluded its arguments in that case. The two PIL petitioners, NGO Common Cause and CPI leader Gurudas Dasgupta, are yet to reply to RIL’s arguments.
Change of Arbitrators:
Justice SS Nijjar had earlier appointed James Spiegelman as a third party arbitrator. However, the decision to appoint the Australian Judge was reversed as soon as it was found out that he was one of RIL’s preferred arbitrators. The Ministry of Petroleum was given two lists containing names of possible third-party arbitrators. It however decided to shun both. A key aspect is that the court had also insisted that the third arbitrator should be of neutral nationality as per international practice i.e. not from Canada, India or UK, the three parties to the PSC and hence the row. As a result, the Government’s plan to appoint an Indian arbitrator was not possible. The other two arbitrators are former Chief Justice of India VN Khare for the government and former CJI SP Bharucha for RIL. However, they couldn’t agree on a third name, prompting Reliance to seek court intervention to break the deadlock.