Reliance Industries Argues KG Basin Arbitration Was International, Not Domestic
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TL;DR
- Reliance Industries argued before the Supreme Court that the KG Basin-related arbitration was international, given the participation of foreign partners BP and Niko.
- The Delhi High Court had earlier treated the $1.7 billion arbitration as a domestic dispute and set aside the award in favor of the RIL-led consortium.
- RIL claims all consortium partners were parties to the arbitration and that the profits and costs were jointly shared.
- The Supreme Court is hearing petitions challenging the High Court's decision, with further hearings scheduled.
Overview
Reliance Industries Ltd (RIL) appeared before the Supreme Court of India to challenge the Delhi High Court's decision to set aside a $1.7 billion arbitral award related to gas migration claims in the Krishna-Godavari (KG) Basin. RIL maintains the arbitration was international in character due to the involvement of foreign partners BP Exploration and Niko Resources, despite previous judicial findings treating the dispute as domestic.
What Happened
On Wednesday, RIL, represented by counsel Abhishek Manu Singhvi, told the Supreme Court that their arbitration with the Indian government and ONGC over the KG Basin gas migration should be recognized as an international commercial arbitration. RIL argued this point on behalf of the entire consortium, which includes BP Exploration (UK) and Niko Resources (Canada).
RIL's counsel cited the production sharing contract (PSC), arbitration filing, and tribunal composition to assert that all investments and profits under the contract were shared among the partners, not RIL alone. The legal team claims the arbitration was initiated on behalf of all partners, treating them collectively as the contracting party.
The Delhi High Court had earlier set aside the $1.7 billion arbitral award in favor of the RIL-led consortium, ruling that the matter was a domestic dispute. RIL and its partners are now appealing this outcome before the Supreme Court.
The Supreme Court declined to pause the proceedings for mediation and will continue hearings on the matter. The dispute centers on ONGC's 2013 claim that gas had migrated from its adjoining blocks into the RIL-operated KG-D6 block, following a third-party technical report and a government compensation demand.
Context
The arbitration arose after ONGC alleged in 2013 that gas worth over ₹11,000 crore had migrated from its blocks to the KG-D6 field operated by the consortium of RIL, BP, and Niko. An official study confirmed the migration, and a government committee found RIL had been unjustly enriched, leading to a compensation demand.
Arbitral proceedings began in 2016, with the tribunal ruling in favor of RIL and its partners in 2018. Subsequent court actions led to the Delhi High Court's division bench overturning a favorable single judge ruling, prompting the Supreme Court appeal.
Why It Matters
- The classification of the arbitration as international or domestic affects enforcement and jurisdictional issues critical to the parties.
- The dispute involves billions of dollars in claims and the allocation of responsibility in joint venture operations involving Indian and foreign investment in India's energy sector.
- The Supreme Court's decision could influence the treatment of cross-border consortia in Indian arbitral proceedings.