In CC/Devas (Mauritius) Ltd v. Republic of India, 2022 QCCS 4785, Justice Pinsonnault rejected the Republic of India’s effort to invoke state immunity in response to an application seeking the recognition and enforcement of two investment treaty awards. He found that the Plaintiffs had met their burden to prove that (1) the commercial activities exception applied, and (2) India had waived state immunity to enforcement proceedings.
Background – The saga underlying this case has spanned more than a decade of litigation, arbitration, and administrative proceedings across the world. At the core is a 2005 deal for the commercialization of satellite telecommunications spectrum in India. An attempt at a concise summary of key context follows:
- The original Plaintiffs before Justice Pinsonnault held shares in Devas Multimedia Private Limited (“Devas India”). In early 2022, the original Plaintiffs assigned their interests to the named Plaintiffs in continuance.
- In 2005, Devas India executed a lease of telecommunications spectrum and satellite capacity (the “Devas Agreement”) from an Indian company called Antrix. Antrix is wholly owned by India and operates as the “commercial arm” of India’s Department of Space and the Indian Space Research Organization.
- On February 17, 2011, India’s Cabinet Committee on Security (“CCS”) announced that the Devas Agreement would be annulled; on February 25, 2011, Antrix terminated the Devas Agreement, claiming force majeure.
- In mid-2011, Devas India commenced an arbitration against Antrix under the ICC arbitration clause in the Devas Agreement. The ICC arbitration was seated in New Delhi, India.
- In mid-2012, Mauritius-based shareholders of Devas India, commenced an UNCITRAL-rules arbitration seated in the Hague, Netherlands (the “Treaty tribunal”), under the Mauritius-India Bilateral Investment Treaty (“BIT”).
- In 2015, the ICC tribunal ruled against Antrix and ordered it to pay Devas India USD $562.5 million in damages, plus interest (“the ICC Award”).
- In 2016, the Treaty tribunal found India had breached its obligations under the BIT not to unlawfully expropriate and to afford fair and equitable treatment to the investors’ investments. In October 2020, the Treaty tribunal awarded over USD $111 million in damages, interest, and costs to the original Plaintiffs (“the Treaty Awards”).
- In late 2021, the original Plaintiffs sought to enforce the Treaty Awards in Québec, where the International Air Transport Association is headquartered. In CC/Devas (Mauritius) Ltd. v. Republic of India, 2022 QCCS 7, the original plaintiffs obtained attachment before judgment of assets located in Québec of the India Airports Authority and Air India, Ltd., both on the basis that they were the alter ego of India. Those attachments were later lifted by the Québec Court of Appeal in Air India, Ltd. v. CC/Devas (Mauritius) Ltd., 2022 QCCA 1264.
- In February 2022, shareholders of Devas India initiated a second treaty arbitration against India. The second treaty arbitration alleges, in part, violations of international obligations arising from India’s efforts to avoid enforcement of the ICC Award
Justice Pinsonnault addressed India’s claim of state immunity from enforcement of arbitral awards made against it.
The commercial exception to state immunity – Canada follows the restrictive theory of state immunity, implemented through the State Immunity Act, RSC 1985, c S-18 (the “SIA”). Under the SIA, foreign states are immune from jurisdiction in Canada unless an exception is established.
Section 5 of the SIA contains the exception for commercial activities: “A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.”
Before Justice Pinsonnault, India argued that the decision of India’s CCS to annul the Devas Agreement was a governmental act of economic and national security policy, not a commercial act. India sought to distance itself from the Devas Agreement between Devas India and Antrix.
Justice Pinsonnault disagreed with India’s narrow framing, citing Re Canada Labour Code,  S.C.R. 50. In that case, the Supreme Court of Canada explained, at p. 70, that “state activity can be characterized only after appreciating its entire context.”
Elements of relevant context, in Justice Pinsonnault’s view, included:
- the status of Antrix as the commercial arm of the Indian Space Research Organisation, which is wholly owned by India and administered by the Department of Space (para. 90);
- India’s failure to honour “contractual obligations and undertakings under the BIT” (para. 96);
- The commercial purpose of the BIT to “incite the citizens of Mauritius to make financial and commercial investments in India.” (paras. 96, 106)
- The commercial purpose of the lease of S-band spectrum to Devas India (paras. 97, 102);
- The commercial effect of India’s decision to annul the Devas Agreement (paras. 115-16, 127-129, 135-137)
Justice Pinsonnault concluded, at para. 86, that “upon a proper determination of the activity at issue – namely, [India’s] breaches of a commercial treaty arising from its annulment of a commercial contract without fair and equitable compensation – it is clear in the Court’s opinion that [India] is not immune from the jurisdiction of this Court since the Commercial Activity Exception can be validly invoked by the Plaintiffs.”
Having concluded that the commercial exception applied, Justice Pinsonnault noted, at para. 141, that one exception to state immunity would have sufficed to find jurisdiction over India. However, he went on to consider whether India had waived state immunity in respect of the Treaty Awards.
The waiver issue – Section 4(2)(a) of the SIA provides that a foreign state waives state immunity where it “explicitly submits to the jurisdiction of the court by written agreement or otherwise either before or after the proceedings commence.”
Justice Pinsonnault noted that Canadian courts applying SIA section 4(2)(a) have consistently asked whether the foreign state’s alleged submission to jurisdiction was “clear” and “unambiguous”, rather than “explicit” or “implicit”. The Plaintiffs argued that India had waived state immunity in the Québec litigation by (1) agreeing to binding arbitration of disputes under the BIT, (2) participating in the treaty arbitration under the UNCITRAL Rules, (3) joining the New York Convention, and (4) selecting a seat of arbitration in a New York Convention state (the Netherlands).
Justice Pinsonnault agreed and concluded, at para. 156, that in general, “states agreeing to international arbitration under bilateral investment treaties necessarily consent to have orders made against them and necessarily waive claims to state immunity.” However, an exception may exist where “the state specifically reserved its right to raise its jurisdictional immunity at the execution level in the bilateral investment treaty, which is not the case herein.”
India’s status as a signatory to the New York Convention bolstered Justice Pinsonnault’s analysis. The New York Convention anticipates that awards made in the territory of state parties will be subject to reciprocal recognition and enforcement actions elsewhere. He found, at para. 168, that Canadian courts have consistently held that by joining the New York Convention, and participating in arbitration in a Convention state without having effectively reserved a state immunity defense, a “state entity should be considered to have waived jurisdictional immunity under the SIA in relation to […] enforcement proceedings.”
For more support for this conclusion, see Collavino Incorporated v. Yemen (Tihama Development Authority), 2007 ABQB 212, at paras. 136-139, Crystallex International Corporation v. Bolivarian Republic of Venezuela, 2016 ONSC 4693, at paras. 40-41, and Sunlodges Ltd. v. The United Republic of Tanzania, 2020 ONSC 8201, at paras. 10-15.
This finding is also consistent with jurisprudence on the waiver of state immunity in the United States and Australia. At para. 171, Justice Pinsonnault noted that this conclusion was also supported by a recent Delhi High Court judgment, which reasoned: “it cannot be contended by a Foreign State that its consent must be sought once again at the stage of enforcement of an arbitral award against it, while ignoring the fact that the arbitral award is the culmination of the very process of arbitration which the Foreign State has admittedly consented to.”
Lastly, Justice Pinsonnault referred to Article 32(2) of the UNCITRAL Arbitration Rules, which provides, in part, that awards “shall be final and binding on the parties”, who “undertake to carry out the award without delay.” At para. 178, Justice Pinsonnault noted that this “further demonstrate[s] [India’s] clear and unequivocal agreement that arbitration awards such as the Treaty Awards, could be rendered and enforced against it…”
The judgment then dealt with two of India’s remaining arguments regarding waiver: (1) that fraud on the part of Devas India nullified any waiver found in India’s submission to arbitration under the BIT, and (2) that waiver based on its consent to arbitration could only apply to the original Plaintiffs (not to the Plaintiffs in continuance of proceedings).
The fraud issue – India sought to introduce a final judgment of the Supreme Court of India (the “SCI Judgment”) which had, it said, found that the original Devas Agreement was “tainted by fraud.” India argued that the judgment was res judicata under Article 2848 of the Civil Code of Québec (C.C.Q.), and entitled to a presumption of validity under Article 3155 C.C.Q.
At paras. 197-202, Justice Pinsonnault summarized Plaintiff’s response that the SCI Judgment was (1) irrelevant to India’s immunity to recognition and enforcement, (2) lacked res judicata effect, (3) had resulted from a process designed to “railroad” Devas India and save Antrix from having to pay the ICC Award, and, (4) if admitted as evidence of fraud, would require the Court to conduct a mini-trial with substantial new evidence on the fraud claims because they had been denied that opportunity at every level in India.
Justice Pinsonnault found, at para. 209, that the SCI Judgment was not res judicata because the Québec litigation and SCI proceedings concerned different parties and different claims. He also concluded, at paras. 221 and 242, that the SCI Judgment was irrelevant to the recognition and enforcement action before him because the subject matters were “completely different.”
With respect to India’s Article 3155 C.C.Q. argument, Justice Pinsonnault found that the presumption of validity of a foreign judgment is rebuttable, and in any event, India had not sought to enforce the SCI Judgment in Québec. India also argued that the SCI Judgment was entitled to weight as a “semi-authentic act” under Article 2822 C.C.Q. Justice Pinsonnault disagreed. He found, at para. 238, that “facts referred to in semi-authentic act [sic] are not binding to the Québec Courts…” The result, at para. 250, was that Justice Pinsonnault allowed India to file the SCI Judgment as a semi-authentic act, but only for the purpose of showing that Devas India was being liquidated under the laws of India.
The effect of the assignment – The last issue concerned the assignment by the original Plaintiffs of their rights, title, and interest in the Treaty Awards to the Plaintiffs. Justice Pinsonnault concluded, at para. 259, that Article 1637 C.C.Q. applied and that “all the positive legal attributes of the Treaty Awards to which the Mauritian Investors (the Original Plaintiffs) were entitled to are also available to the Plaintiffs in continuance who can also invoke the Waiver Exception against [India] herein.”
Update: Leave to appeal granted at 2023 QCCA 327.
First, The Devas/India saga has been covered in previous Arbitration Matters Case Notes, including Québec – Enforcement of foreign award against alter egos – #578, and its counterpart, the appropriately-titled Québec – No enforcement of award against alter egos – #681. In the aftermath of the judgment on state immunity, the recognition and enforcement application will move ahead against India. Justice Pinsonnault foreshadowed arguments that are likely to be featured in coming proceedings when, in para. 148, he referred to the “certain relevancy” the SCI Judgment may have in a hearing on the merits of the Plaintiffs’ efforts to enforce the Treaty Awards.
Second, a few passages of the judgment could raise eyebrows, particularly to public international law practitioners. For example, at paras. 96, 101, 106, 129, and 135-137, Justice Pinsonnault appears to characterize the BIT itself as the commercial activity justifying an exception to state immunity. In particular, at para. 129, he observed “there is no doubt in the eyes of the Court that by executing the BIT, [India] decided and accepted to conduct commercial activities within the meaning of Section 5 of the SIA, to promote investments in India.” (emphasis added)
Characterizing the entering-into of an investment treaty as a commercial act of a state, justifying the commercial activity exception to state immunity, appears unusual to me. Of course, the stated intent of India and Mauritius in the BIT was to promote and protect investment flows between them, leading to “greater stimulation to the development of business initiatives and […] increas[ing] prosperity in the territories of both Contracting Parties.” In that sense, it is a treaty aimed at stimulating commercial activities. However, the commercial activity exception exists to address unfairness when states engage in commerce like private persons. Private persons cannot conclude treaties, and a state’s power to create international obligations is a governmental function.
Third, on the issue of waiver, the judgment helpfully extends the consistent jurisprudence in Canada on the effects of consenting to arbitration, especially in a New York Convention state. One point to emphasize, as the judgment suggests at paras. 156, 168, and 176, is that for a state to reserve a state immunity defence to recognition and enforcement of an arbitration award, it would likely have to be done at the time of a state’s consent to arbitration.For instance, in TMR Energy v. State Property Fund of Ukraine, 2003 FC 1517, the court reasoned, at para. 65, “bythe mere fact that a state entity should have entered into an arbitration agreement providing for arbitration in a country signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, without reserving its right to jurisdictional immunity, it must be taken to have known and accepted that any resulting award could be subject to recognition and enforcement by judicial process, and thus, have waived jurisdictional immunity in relation to the recognition of the award.” (emphasis added)