The presentation discusses the Investor-state Dispute between Nissan and the Government of India on the failure to provide Investment based Subsidies

1. The Nissan-India Dispute
(Investor-State Arbitration)
BADRINATH SRINIVASAN LL.M., A.I.I.I., MCI. ARB.
03.01.2018
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2. The MOU and the Dispute
 Chennai region in the State of Tamil Nadu is called the Detroit of South India (now
a pejorative reference) for being an automobile manufacturing hub
 Nissan’s contentions:
 2008 MOU between Nissan and the State Government to set up manufacturing plant in
Tamil Nadu
 State Government (Government of Tamil Nadu) was to provide refund of Indirect taxes
as Investment Promotion Subsidy (IPS).
 State Government owes Rs 1,901 crore in IPS and Rs 822 crore in input VAT
 Nissan had invested about Rs. 6,100 crores already.
 Dues pending since 2015
 IPS was critical to the investment’s viability

3. Notice of Arbitration
 Nissan sent Notice of Arbitration to Government of India in July 2016
 Total claim: Rs. 5,000 crores (approx.)
 Rs. 2900 crores towards unpaid Investment Promotion Subsidies
 Rs. 2100 crores towards damages and interest
 Arbitration has been invoked under the Indo-Japanese Comprehensive Economic
Partnership Agreement (CEPA)
 Nissan claims, CEPA does not require exhaustion of remedy in local courts
 Since no progress in settling the issue, Nissan issued Ultimatum in August 2017 to
proceed with the arbitration

4. Dispute
 While dispute is over the amount, the moot question seems to be whether such
subsidy is available only for domestic car sales or is available even for exports?
 Officials of the State of Tamil Nadu argue such benefits are not available for
exports.

5. Proceedings in the Madras High Court
 Tamil Nadu Government sought injunction from the High Court of Madras against
Nissan from proceeding with arbitration (anti-arbitration injunction)
 Crux of the stance of the TN Government is that the remedy lies in the MoU and
not in the CEPA
 Clause 15 of the MOU pertains to dispute resolution
 The High Court ordered notice to be issued in an order in the first week of
December

6. Subsequent Proceedings before High
Court
 Interestingly, the Central Government disagreed with the Government of Tamil
Nadu in the High Court on many aspects during the hearing on 02.01.2018.
According to it:
 Tamil Nadu does not have any locus standi to seek injunction against the international
arbitration invoked by Nissan
 Mere existence of the MOU would not prohibit Nissan from invoking CEPA
 But since Nissan chose to avail of the local remedies (Nissan filed several writs
challenging the State Government’s orders), it cannot simultaneously seek international
arbitration under the CEPA.
 The Tamil Nadu Government is not correct in contending that the Central Government
entered into the CEPA with Japan merely to coerce the State into paying the alleged
subsidies.
 Matter has been posted to 22.01.2018 for further proceedings.

7. Interesting Issues
 Whether local exhaustion of remedies is a requirement to invoke arbitration under
the CEPA?
 Even if local exhaustion of remedies is not a requirement, once the Investor avails of
the local remedies, can it invoke remedies under the CEPA simultaneously?
 Divergence between the Central and the State Government’s stance
 Stance of the Government of Tamil Nadu that it was not concerned with the CEPA
 Impact of Federalism, Conflicting stance between the Central and the State
Government, and the Investor-State Arbitration system.
 Substantive aspects of the Issue and violation of the CEPA.

8. Disclaimer
 This presentation is not legal advice and is meant for academic use only.
 The information contained in the post is based on publicly available information.