The Centre has accused Japanese automaker Nissan Motor of having placed “fundamentally distorted and false” facts before an international arbitral tribunal constituted at the instance of the company for alleged violations of the 2011 Comprehensive Economic Partnership Agreement (CEPA) between Japan and the Republic of India.
The submission has been made in a counter filed before the tribunal through India’s counsel Mark A. Clodfelter of Washington D.C., and Amit Kumar Mishra of New Delhi. A copy of the counter, available with The Hindu, states that India was not responsible for any of the alleged losses suffered by the automaker.
According to the Centre, the origin of the dispute could be traced back to 2007 when Government of Tamil Nadu (GoTN) decided to provide tax refunds to ‘Ultra Mega Integrated Automobile Projects.’ In 2008, Nissan Motor and its French consortium partner Renault agreed to establish such a project at Oragadam on the outskirts of Chennai.
The GoTN and R&N consortium entered into a Memorandum of Understanding authorising the tax refunds in the form of fiscal incentives. However, in 2012, the consortium changed its business scheme in such a way that it would not only receive the tax refunds at an accelerated pace but would also obtain double tax refund on certain transactions.
In order to prevent such double tax refunds, the Legislative Assembly amended the Tamil Nadu Value Added Tax Act of 2006 and the State government too passed suitable executive orders. These actions that had made the Japanese company invoke the 2013 Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), it argued.
The automaker had served a notice on the Prime Minister in 2016 before approaching the tribunal last year alleging that GoTN wrongfully breached its obligation to pay the tax refunds in a timely manner. It claimed that ₹ 2,057.36 crore was outstanding as on February 23, 2017 despite a round of payment of ₹ 1,040 crore by GoTN in September and November 2016.
These actions, according to the company, had resulted in violation of the fair and equitable treatment clause of CEPA. It claimed damages representing the allegedly unpaid tax refunds as promised in the 2008 MoU along with interest. However, the Centre primarily questioned the jurisdiction of the international arbitral tribunal to decide an investment dispute.
It pointed out that Article 10(1) of CEPA excludes the applicability of CEPA on taxation measures. Further, the tribunal was apprised of a clause in the MoU which provides for R&N consortium to settle any dispute with GoTN through a domestic arbitral tribunal seated in Chennai and conducted under the Indian Arbitration and Conciliation Act of 1996.
Urging the international tribunal to dismiss all claims in the arbitration on the ground of lack of jurisdiction, the Centre wanted that Nissan Motors should be ordered to bear all the costs, including those incurred by India for legal representation before the international forum, along with interest.
