The Hindu : Bechtel, GE file arbitration suit

Online edition of India's National Newspaper
Tuesday, Sep 23, 2003

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Bechtel, GE file arbitration suit

By Our Special Correspondent

MUMBAI SEPT. 22. Bechtel Enterprises Holdings Inc. and GE Structured Finance (GESF) have filed an arbitration action against the Government of India to recover their investments in the Dabhol Power Company (DPC).

"The total value of the claim may reach $600 million for each company and represents their direct investments of about $120 million each and their shares of the market value of DPC specified in the power purchase agreement (PPA) signed by the Maharashtra State Electricity Board (MSEB)," stated a joint press release from Bechtel and GE.

"We have attempted to resolve our legal and contractual claims but have been blocked at every turn," said Rick Smith, Executive Vice-President and Managing Director of Bechtel Enterprises. "Regrettably, this international arbitration demand must be made".

"We will continue to pursue a full recovery of these investments through all available means," said Scott Bayman, President of GE India. "At the same time, we remain committed to helping to restart this much needed power generation facility," Mr. Bayman added.

Recently, an independent arbitral in the U.S. ruled unanimously in the company's favour, finding that the Government of India and its agents illegally took the companies' interests in DPC.

In the second arbitration, the companies detailed systematic attempts by both State and national officials to deny DPC's rights relating to the power project including denying the ability to operate Phase I of the project, complete construction of Phase II, reimburse contractors, service debt and pay dividends to the project sponsors; MSEB's refusal to make payments under the PPA, improperly rescinding the PPA, and ceasing to buy power from the DPC. These actions effectively destroyed the PPA, the primary asset of DPC, and represent an improper taking of the plant itself. It also alleged that the actions by the financial institutions controlled by the Government of India to seize control of DPC assets, depriving the companies of their investments.

Under the India-Mauritius Bilateral Investment Treaty, each party appoints one arbitrator within two months of this filing, a third arbitrator is appointed by the two selected arbitrators.

Bechtel and GE stated that they submitted their arbitrator's name to the Government of India on September 5, thus beginning the 60-day panel selection process. The arbitration will commence after all arbitrators are chosen, it added.

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