Almost three years after the department of telecommunications (DoT) withdrew its approval to grant telecom licences to ByCell Telecommunications India Pvt. Ltd., on grounds of security concerns, the foreign majority stakeholders in the Indian company have served a notice on the Government of India, alleging violations of the Russia-India and Cyprus-India Bilateral Investment Treaties (BITs).
ByCell India has about 74% foreign investment by ByCell Holding AG, incorporated in Switzerland. The Swiss company is 97% owned by Cyprus-based Tenoch, which is owned by two Russian nationals. For this complex structure, violations of both the Cyprus and Russia BITs have been alleged. It is interesting to note that, although Switzerland is the nation to which ByCell India can claim the closest link, it has not chosen to seek compensation under the India-Switzerland BIT.
Sequence of Events
2006: ByCell India obtained clearance from the Foreign Investment Promotion Board (FIPB) for a Rs. 500 crore investment.
2007: An amendment approval was granted with clearance from the Ministry of Home Affairs (MHA).
2008: It further received clearance to invest $500 million and was first in the queue to obtain mobile permits under the erstwhile first-come-first-served policy. Issuing of actual license was delayed, however, on various grounds.
2009: MHA revoked its security clearance. FIPB therefore revoked the approval that was earlier granted to ByCell.
2010: A writ petition by the company before the Delhi High Court was rejected.
2011: An appeal preferred against the above rejection was further dismissed.
2012, June: Communication sent to the Prime Minister, Telecom Minister, Home Minister, Attorney General and other cabinet ministers, alleging grossly arbitrary and discriminatory treatment against ByCell during the licensing process, thereby frustrating legitimate expectations and denying fair and equitable treatment (FET) as required under Article 3(2) of the Russia-India and Cyprus-India BIT.
We have not seen a copy of this communication, and have relied on news reports here and here.
Security Concerns
On another note, to throw some light on the reason for revocation of license by the FIPB, this news report of 2008 may be helpful. It appears from this report, that the Swiss government could not trace the parent company of ByCell India in Switzerland. This may be relevant for the following point.
Legal Questions
There is, first, the obvious question as to whether the FIPB can revoke an approval it had already granted. It is well-established that there can be no estoppel against operation of law. Moreover, FIPB has revoked/withdrawn approvals on a few occasions in the past.
Then there is this: Why did the investors seek compensation under the Russia and Cyprus BITs? Why not turn to the Swiss BIT which also affords FET under Article 3(2)? Even more so, when the immediate holding company of ByCell India is incorporated in Switzerland, is it legally permissible for the shareholder of the shareholder to seek protection of investment under the Cyprus BIT? Taking this further, can the shareholder (Russian national) of the shareholder (Tenoch) of the shareholder (ByCell Holding) claim under the Russian BIT?
It will be interesting to note the progress of this dispute, specially with respect to the questions posed above.
ByCell India has about 74% foreign investment by ByCell Holding AG, incorporated in Switzerland. The Swiss company is 97% owned by Cyprus-based Tenoch, which is owned by two Russian nationals. For this complex structure, violations of both the Cyprus and Russia BITs have been alleged. It is interesting to note that, although Switzerland is the nation to which ByCell India can claim the closest link, it has not chosen to seek compensation under the India-Switzerland BIT.
Sequence of Events
2006: ByCell India obtained clearance from the Foreign Investment Promotion Board (FIPB) for a Rs. 500 crore investment.
2007: An amendment approval was granted with clearance from the Ministry of Home Affairs (MHA).
2008: It further received clearance to invest $500 million and was first in the queue to obtain mobile permits under the erstwhile first-come-first-served policy. Issuing of actual license was delayed, however, on various grounds.
2009: MHA revoked its security clearance. FIPB therefore revoked the approval that was earlier granted to ByCell.
2010: A writ petition by the company before the Delhi High Court was rejected.
2011: An appeal preferred against the above rejection was further dismissed.
2012, June: Communication sent to the Prime Minister, Telecom Minister, Home Minister, Attorney General and other cabinet ministers, alleging grossly arbitrary and discriminatory treatment against ByCell during the licensing process, thereby frustrating legitimate expectations and denying fair and equitable treatment (FET) as required under Article 3(2) of the Russia-India and Cyprus-India BIT.
We have not seen a copy of this communication, and have relied on news reports here and here.
Security Concerns
On another note, to throw some light on the reason for revocation of license by the FIPB, this news report of 2008 may be helpful. It appears from this report, that the Swiss government could not trace the parent company of ByCell India in Switzerland. This may be relevant for the following point.
Legal Questions
There is, first, the obvious question as to whether the FIPB can revoke an approval it had already granted. It is well-established that there can be no estoppel against operation of law. Moreover, FIPB has revoked/withdrawn approvals on a few occasions in the past.
Then there is this: Why did the investors seek compensation under the Russia and Cyprus BITs? Why not turn to the Swiss BIT which also affords FET under Article 3(2)? Even more so, when the immediate holding company of ByCell India is incorporated in Switzerland, is it legally permissible for the shareholder of the shareholder to seek protection of investment under the Cyprus BIT? Taking this further, can the shareholder (Russian national) of the shareholder (Tenoch) of the shareholder (ByCell Holding) claim under the Russian BIT?
It will be interesting to note the progress of this dispute, specially with respect to the questions posed above.
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