San Francisco, CA - May 31, 2005
Armed with a federal court ruling handed down Friday, an affiliate of Bechtel Corporation has attached all shares in Dabhol Power Corp. owned by a company controlled by the Indian state of Maharashtra, the country's commercial center and second largest state. Bechtel took action when the Indian company failed to meet a Friday deadline, set by an international arbitration panel last month, to pay Bechtel US$123 million for violations of its shareholder rights in the Dabhol power project, the largest foreign investment in India's history.
Bechtel Wins Court Order to Seize Indian Assets
U.S. District Judge Lewis Kaplan, sitting in the Southern District of New York, signed the order directing the attachment of assets held by Maharashtra Power Development Corporation Ltd., which holds a 14.16 percent share in Dabhol Power Corp. General Electric and Bechtel hold a majority interest in DPC, which was forced to shut down in 2001 when the state of Maharashtra reneged on its legal commitments to purchase power and support completion of the second of two generating units.
Judge Kaplan's order followed a decision handed down April 27 by the International Court of Arbitration in Paris, which ruled that the Maharashtra company and the Government of Maharashtra conspired to block DPC from exercising its contractual rights to arbitrate its claims against the state of Maharashtra and government of India for the expropriation of DPC's investment. The arbitration panel gave Maharashtra until May 27 to pay the awarded damages.
"We are disappointed that Indian authorities have given us no choice but to begin proceedings to seize their assets," said Bechtel Executive Vice President and Director Tim Statton. "Their refusal to acknowledge valid legal orders also sends a very troubling message to foreign investors whose capital and technical expertise could help modernize India's infrastructure. Nevertheless, we stand ready to help restart the much-needed Dabhol facility, once India upholds our legal rights and abides by its international obligations."
In 2003, another independent tribunal in the United States ruled unanimously in Bechtel's favor, finding that its interests in DPC were illegally taken and ordering the Overseas Private Investment Corporation, a U.S. government agency, to pay US$28.6 million in political risk insurance claims to Bechtel affiliates. OPIC has paid the award, with interest.
Bechtel affiliates in Mauritius and the Netherlands have filed two additional arbitration claims against the Government of India to recover the value of their lost investments in DPC, which could total more than US$6 billion. The Mauritius arbitration proceeding is scheduled to be heard by an independent tribunal in London in July 2005, while the Netherlands proceeding is expected to be heard in mid-2006.