RAKIA’s claim for damages rejected by the arbitral tribunal

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Visakhapatnam: With a shot in the arm, the government of Andhra Pradesh won a decisive victory: a claim of 273 million dollars by Ras-Al-Khaimah Investment Authority (RAKIA) following the cancellation of the agreement of Bauxite Supply (BSA) signed by AP Mineral Development Corporation in October 2008.

Following a memorandum of understanding signed between the AP government, RAKIA and its Indian partner Penna Group in 2007, an agreement was reached to supply bauxite ore to the Makavarapalem alumina refinery and smelter near from Visakhapatnam. BSA was to supply 224 million tonnes from the Jerrela group of mines located in the Chintapalli Forest Reserve. The deal was scrapped during TDP rule in April 2016, alleging irregularities in the award.

The International Arbitration Notice was served citing violation of the provisions of the UN-UAE Commission on Rules of International Trade Law, the India-UAE Bilateral Investment Protection Agreement and the Supply Agreement in bauxite signed with APMDC in October 2008.

Following the failure of several efforts to reach a negotiated settlement, the London-based International Dispute Resolution Center for Arbitration and Mediation (IDRC) rejected RAKIA’s claim for damages, saying that it had no jurisdiction over the bilateral investment treaty (BIT) and ordered the plaintiff and defendant to share the arbitration costs.

In a tweet, IAS Principal Secretary and Senior Officer Gopal Krishna Dwivedi said: “GoI (GoI) and PA Government are winning the case at London International Arbitration Tribunal against RAKIA. This is a great achievement for the State and the APMDC.” He commended the entire GoI and PA government team who worked hard for this.

When contacted, an aide to Chief Minister YS Jagan Mohan Reddy, told Bizz Buzz that although the damages claim was rejected on technical grounds, it was a big relief for the government. He said the government is committed not to allow bauxite mining against the will of the tribals.

The project raised a public outcry with strong opposition from civil and tribal rights activists on the grounds of violation of Section 1/70 of the Land Transfer (Regulation) Act which prohibits land transactions between tribals and non-tribals in planned areas to prevent the exploitation of unfortunate tribals by non-tribals. The settlement is also popular as a Samata order following the Supreme Court’s judgment in the writ filed by Samata, an NGO against the mining lease granted by APMDC in Araku area to Birla Periclase in 1997.

The alumina refinery and smelter project under the umbrella of Anrak Aluminum Limited (AAL) with a 13% stake by RAKIA and 87% by Penna Group has experienced difficulties following the loan contracted for the construction of a 2.5 million ton refinery at Makavarapalem. functional for lack of bauxite ore, the main raw material for the production of aluminium. The loan amount of around Rs 4,000 crore which was drawn down from a consortium of banks was then returned to NCLT where an agreement was reached for repayment. The refinery has also recently started production with management’s decision to import raw material.

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