On 1 August 2023, the US Court of Appeals ruled that the Antrix Corporation “enjoyed immunity under the Foreign Sovereign Immunities Act.” The ruling essentially reversed the confirmation provided in November 2020, by the District Court of Seattle, in exercising personal jurisdiction over Antrix when they had claimed immunity under the Foreign Sovereign Immunities Act 1976. With this new ruling, all of the Devas’ shareholders’ attempts to claim compensation or rewards under various US jurisdictions were nullified. Devas Multimedia had pursued the case, trying to enforce the International Chamber of Commerce (ICC) arbitration against Antrix in the US, France, the UK, Germany, Mauritius and the Netherlands.
The commercial arm of ISRO, Antrix Corporation, got into a commercial arbitration case with Devas Multimedia with the ICC after they terminated the deal based on an agreement made in 2005. Devas’ base argument was that the Antrix-Devas satellite deal was wrongfully terminated. In September 2015, the ICC ordered Antrix Corporation to pay a compensation of USD 1.2 billion to Devas Multimedia after the Indian government, in February 2011, announced that the deal could not go forward. The Indian decision cited that the S-band spectrum was for the security purposes of the country and that the agreement to provide commercial mobile services through ISRO’s GSAT 6 and 6A (now dedicated satellites for the Indian Navy and the Indian Army) could not be allowed. In July 2023, the Hague Court announced that the American investors of Devas could not claim the enforcement of the ICC ruling of USD 1.2 billion, stating that Devas was fraudulently incorporated. The Supreme Court of India also declared Devas Multimedia as fraudulent. In the Netherlands, Devas Multimedia had sought to seize the assets in the form of contract receivables of Antrix. The Dutch courts upheld the decisions/orders of the National Company Law Tribunal and the Supreme Court of India and rejected the requests of Devas Multimedia.
Background to the flawed Antrix-Devas Deal
It started with a memorandum of understanding between Antrix and Forge Advisors LLC, a US-based corporation from Virginia. The deal was to jointly try and implement new satellite applications across multiple sectors like education, agriculture, telecommunications or media. Forge Advisors further worked towards an Indian joint venture and named it DEVAS (Digitally Enhanced Video and Audio Services).
In 2005, Antrix signed an agreement with Devas, where the latter would develop a platform capable of delivering multimedia and information services through satellite. Antrix would provide the space segment for offering the services. For this, Devas brought an investment of 579 crore INR. The proposal indicated that the service would be launched by the end of 2006. However, around the time of the 2G controversy in 2011, Antrix terminated the agreement on the grounds of force majeure, which means that a party failed to fulfil a contract due to unforeseen circumstances.
Following the deal’s termination, Devas initiated a commercial arbitration before the ICC tribunal. Its Mauritius investors initiated a Bilateral Investment Treaty (BIT) arbitration under the India-Mauritius BIT, and Deutsche Telekom, a German company, invoked BIT proceedings under India-Germany Bilateral Investment Treaty. The BIT arbitrations are legally and conceptually distinct from the commercial arbitrations of the ICC. These deliberations were conducted parallel to each other. In 2020, the case with Mauritius held the Indian government responsible for indirect expropriation. It stated that the termination violated fair and equitable treatment (FET) and awarded Devas approximately USD 111.30 million in compensation. In 2017, the tribunal in Deutsche Telecom also held India responsible for the breach of FET and awarded Devas about 101 million dollars in compensation. India challenged both awards in their respective arbitration courts, and they upheld the BIT compensation awards.
Lessons from the avoidable 12-year legal dispute
Antrix had entered into the deal with a company that had been formed merely one year before the contract was signed. There also emerged concerns over the corruption allegations against the deal where the slots on the S-band spectrum were offered at throwaway prices. However, the annulment of the deal did not mention the concerns over the corruption related to the deal but sufficiently stated that the cancellation was due to the need for S-band allocation for strategic needs of defence, paramilitary forces, and the railways. Further, during the BIT arbitrations, India did not raise the issue of fraud or corruption as a jurisdictional objection until 2016, despite finding several anomalies in a 2012 Comptroller Auditor General report, where the Devas-Antrix contract, such as the agreement that promotes the interest of an individual private entity at the cost of public interest. In 2016, when the Indian judicial authorities requested a stay to the proceedings stating the anomalies in the Devas-Antrix contract, they were rejected as being mistimed.
This failure of timely regulation resulted in a longer duration of addressing the matter.
In this case, the finance ministry has played a pivotal role in the investment treaty arbitration. But for a robust litigation strategy, it is important to work towards establishing law firms with fair expertise in representing a case for India. A good example would be the US Office of the Assistant Legal Adviser for International Claims and Investment Disputes, where the office coordinates international claims disputes. Domestically, it was essential to fastback the criminal proceedings against Devas.
The National Company Law Appellate Tribunal (NCLAT) and the Supreme Court verdicts that upheld the decision of the National Company Law Tribunal (NCLT) to wind up Devas and liquidate its assets send mixed signals to the investment environment in India. But the case of Devas should be seen as an exception where it has proven to be a fraudulent strategy. It also brings to the question of what would happen to the investors who were unaware of the fraud and invested later in the deal. The failure of due diligence before investing will be a lesson for India’s investors, industries, startups and investment promoters.
A number of other lessons can be derived from this case when it comes to issues dealing with one nation’s resources, assets and intellectual property in a zone with multiple jurisdictions. In this case, the commercial entities still functioned in national jurisdictions, and the deliberations were based on national laws. With the increased number of private space companies and the international collaborative efforts by these companies, it is imperative that such cases may re-emerge. Additionally, the newer cases may not always relate to military security but often would be detrimental to economic security. Dispute mechanisms must be established to predict such cases and remain prepared to address them when they arise.
Harini Madhusudan is a PhD scholar working on Militarisation of Outer Space for her thesis. She is also a teaching assistant at the Department of International Relations, Peace and Public Policy, St Joseph’s University.
