Bechtel's and GE's Interests Wrongly Expropriated by Government of India
Overseas Private Investment Corporation ordered to pay claims of US$28.57 million each to Bechtel and GE
NEW DELHI, INDIA, Tuesday, September 9, 2003—An independent arbitration panel has ruled unanimously that GE and Bechtel's interests in the Dabhol Power Company (DPC), in the Indian state of Maharashtra, were improperly expropriated by the Indian Government. The tribunal ordered a binding award of US$28.57 million each to Bechtel and GE for claims they brought against their political risk insurer, the Overseas Private Investment Corporation (OPIC), an agency of the U.S. Government.
Bechtel and GE each hold 10% equity interests in the US$3 billion Dabhol power plant, idle for more than 24 months. The arbitrators determined the Government of India (GOI) and its agents violated international law through an unlawful taking of GE's and Bechtel's investments in DPC. The tribunal was chaired by former U.S. District Court Judge Charles Renfrew and included David Kay of Gardner Carton & Douglas and Robert Layton of Layton Law Office LLP. Significant findings The Tribunal found:
- A total expropriation has taken place in violation of international law.
- The evidence clearly demonstrates that the Maharashtra State Electricity Board, the Government of Maharashtra (GOM) and the GOI violated the Power Purchase Agreement (PPA), the GOM and GOI guarantees, and the State Support Agreements, for political reasons and without any legal justification.
- The Maharashtra Electricity Regulatory Commission (MERC), the Maharashtra State Electricity Board, the Indian Financial Institutions, and the Indian courts have enjoined and otherwise taken away the claimants' (Bechtel & GE) international arbitration remedies under the PPA, all in violation of established principles of international law, in disregard of India's commitments under the U.N. Convention as well as the Indian Arbitration Act.
The companies also reported that under the terms of their insurance contracts, this action would likely trigger a U.S. Government claim against the Government of India for recovery of the companies' investments in DPC under an investment treaty between both governments.
"We are very pleased that this distinguished panel decided in our favor and concluded that the actions of the State of Maharashtra and the national government of India violated international law and that they took our property without compensation," said Rick Smith, Executive Vice President of Bechtel Enterprises. "We will continue to pursue a full recovery of our investment through all available means." The companies reiterated their willingness to aid in the restart of the Dabhol plant, saying a successful re-commissioning of the plant would help resolve the remaining disputes and ultimately benefit the people and businesses of Maharashtra who urgently need electrical output from the state-of-the-art power plant. "GE and Bechtel have repeatedly indicated to the Government of India and the financial lenders, both foreign and domestic, that they are willing and anxious to assist in the restart of Dabhol phase 1 and the completion of phase 2, as long as the companies are treated fairly," said Scott Bayman, President of GE India. "We have been disappointed by the lack of progress toward a negotiated settlement. And, unfortunately, our legal rights have been blocked at every turn in India. This binding arbitral award by an impartial tribunal reaffirms our position, and is just one of many avenues that we will pursue to recover our investments and construction contractor claims."
The Bechtel organization (www.bechtel.com
) is one of the world's premier development, engineering, construction, and project management companies. It has completed more than 20,000 projects in 140 countries on all seven continents, including more than 300,000 megawatts of generating capacity in over 500 power stations. Bechtel Enterprises Holdings, Inc., is Bechtel's financing, development and ownership company. Since 1990 alone, Bechtel Enterprises has participated in arranging more than $28 billion in project financings; it is a leader in the privatized infrastructure market with interests in power generation, water and wastewater, transportation, telecommunications and other ventures. Bechtel Enterprises owns a 10% interest in the Dabhol Power Company; Bechtel Power Corporation helped construct both Phase I and Phase II of the Dabhol power facilities.
GE's investment in DPC is held by an affiliate of GE Structured Finance (GESF), a leading investor and provider of innovative structured financial products spanning all levels of the capital structure. With more than 30 years of experience, GESF meets the needs of its clients by combining industry and technical expertise with significant financial capabilities. GESF's 400 professionals serve clients in the commercial & industrial, communications, energy, project & trade finance, and transportation markets, worldwide. GESF,www.gestructuredfinance.com
is a unit of GE Commercial Finance, a business of General Electric Company. GE is a diversified services, technology and manufacturing company with operations worldwide.