Reliance Industries Limited and BG Exploration and Production India Limited v India

Case summary

At a glance

Parties: Reliance Industries Limited and BG Exploration and Production India Limited v. the Union of India
Case no.: Arbitration under the Tapti and Panna Mukta PSCs; English High Court Claim Nos. CL-2016-000685 ([2018] EWHC 822 (Comm)) and CL-2021-000100 ([2022] EWHC 1407 (Comm))
Forum and rules: Ad hoc arbitration under the 1976 UNCITRAL Rules, seated in London; challenges under the Arbitration Act 1996
Treaty: Contract claim: arbitration clause in Article 33 of the Production Sharing Contracts of 22 December 1994
Tribunal: Christopher Lau SC (Chairman), Peter Leaver QC, Justice B. Sudershan Reddy (replaced Justice B.P. Jeevan Reddy)
Court: High Court of Justice, Commercial Court: Popplewell J (2018); Sir Ross Cranston sitting as a High Court Judge (2022)
Underlying award(s): Final Partial Award of 12 October 2016; Final Partial Award of 29 January 2021 (Balance EPOD Award)
Sector: Offshore oil and gas
Outcome: 2018: of the claimants' nine challenges to the 2016 Award, only the challenge on the unaddressed Agreements Case succeeded. 2022: India's challenges to the 2021 Award were refused.
Amount: Agreements Case Award (2018): about US$177m of Tapti costs and about US$143m of EPOD costs allowed to be recovered; 2021 Award: about US$111m more of about US$260m claimed

The dispute

On 22 December 1994 the Union of India entered into two Production Sharing Contracts (PSCs) with a "Contractor" made up of Reliance Industries Limited, BG Exploration and Production India Limited and ONGC. The PSCs covered the Tapti gas field and the Panna Mukta oil field off India's west coast. The PSCs are governed by Indian law. Their arbitration clauses are governed by English law and the seat is London. Reliance and BG began arbitration on 16 December 2010 over many issues. These included how the Cost Recovery Limit (US$545 million for Tapti, US$577.5 million for Panna Mukta) caps the recovery of Development Costs, how the Investment Multiple that divides Profit Petroleum is calculated, and payments that the Government's nominees GAIL and IOC withheld under a 2 May 2003 Office Memorandum. The published documents are two English High Court judgments. In the first, Reliance and BG challenged the Final Partial Award of 12 October 2016. In the second, India challenged the Final Partial Award of 29 January 2021, arguing that the Tribunal wrongly used the English rule in Henderson v Henderson to exclude its objections under Articles 297 and 299 of the Indian Constitution.

Key holdings

No serious irregularity in the majority's reading of "Development Costs" in the Investment Multiple as limited to costs under the CRL cap. All the essential building blocks of the reasoning (Articles 1.69, 7.3(a), 13.1 and 34.5) were in play before the Tribunal. A point of construction is not exempt from the duty of fairness in s. 33. 2018 Judgment ¶¶ 31–35
The CRL Award's refusal to use pre-contractual material applied only to the construction of Article 13. It did not stop the Tribunal from relying on the Final Fiscal Proposal on the notional income tax rate, and there was no excess of jurisdiction or unfairness. Permission to appeal under s. 69 against the estoppel finding was refused: the alleged errors were in reality challenges to findings of fact. 2018 Judgment ¶¶ 47–50, 60–74
Challenge 4 succeeded. When the Tribunal said the Agreements Case "no longer falls for determination", it meant it was not deciding it, yet the case still had to be decided. This failure to deal with an issue was a serious irregularity causing substantial injustice. 2018 Judgment ¶¶ 83–87
The Tribunal was right to decline jurisdiction over the defence to the withholdings claim. Challenging the validity of the Office Memorandum and of the withholding notices engages the foreign act of state doctrine. That doctrine applies in arbitration as it does in court. India did not waive it by agreeing to arbitrate, and it raised its objection in time. 2018 Judgment ¶¶ 106–132
The challenges on the Panna Mukta Appendix G case, the GAIL withholding counterclaim, the marketing margin counterclaim and the Tapti production loss counterclaim all failed. 2018 Judgment ¶¶ 91–94, 139–161
Permission to appeal under s. 69 against the 2021 Award was refused. The Henderson v Henderson principle is procedural, so the law of the seat (English law) governs it whatever the law of the contract. It applies in arbitration and to earlier stages of the same reference. The question had not been put to the Tribunal, India's rights would not be substantially affected, and India had itself relied on the principle to win the 2019 Award. 2022 Judgment ¶¶ 58–79
The s. 68 challenges were rejected. There was no unfairness, because the remission was narrow. The Tribunal did deal with the constitutional points on Articles 297 and 299. Section 68(2)(g) cannot be used to reargue alleged errors on Indian public policy. 2022 Judgment ¶¶ 90–96

Procedural history

16 December 2010Reliance and BG file their Notice of Arbitration.
29 July 2011Final Partial Consent Award: the parties agree that London is the seat.
12 September 2012Final Partial Award on Arbitrability.
10 December 2012CRL Award on the construction of Article 13.1, made by majority with Justice B.P. Jeevan Reddy dissenting.
12 October 2016Final Partial Award, with dissenting opinions by Peter Leaver and Justice B. Sudershan Reddy on different issues.
16 April 2018Popplewell J upholds the challenge on the Agreements Case and dismisses the other eight challenges. The 2016 Award is later remitted to the Tribunal on the Agreements Case.
1 October 2018Agreements Case Award. Knowles J's later judgment ([2020] EWHC 263 (Comm)) and his order of 5 March 2020 widen the evidence the Tribunal may consider on the EPOD Agreements Case.
12 March 2019Final Partial Award: the Tribunal holds the residual upside claim barred by res judicata.
29 January 2021Balance EPOD Award, unanimous. The Tribunal issues a Clarification Decision on 9 April 2021.
9 June 2022Sir Ross Cranston refuses India's applications under ss. 68 and 69.

Tribunal, counsel and experts

Decided by: Christopher Lau President
Peter Leaver Co-arbitrator — appointed by the claimant (dissented in part in the 2016 Award)
B.P. Jeevan Reddy Co-arbitrator — appointed by the respondent (dissented on the CRL Award; resigned on 4 February 2014)
B. Sudershan Reddy Co-arbitrator (replaced Justice B.P. Jeevan Reddy on 21 March 2014; dissented in part in the 2016 Award)
Ross Cranston Judge, High Court of Justice, Commercial Court — appointed by a court
For the claimant: Allen & Overy LLP
For the respondent: Dentons UKMEA LLP