The High Court of Delhi in India recently enforced an international arbitral award arising from the London Court of Arbitration between a Japanese and an Indian entity. Both the size of the award and the court's willingness to enforce it in India against an Indian corporation make this an important decision.
Overview of the Arbitration
The arbitration arose out of the dissolution of a joint venture between Tata Sons Ltd. (part of the Indian conglomerate Tata Group) and NTT Docomo Inc. (a Japanese telecommunications company) in Tata Teleservices Ltd.
In 2009, Docomo purchased a 26.5% stake in Tata Teleservices. The share purchase agreement provided Docomo with the right to withdraw from the venture if Tata Teleservices failed to reach certain performance targets. If Docomo chose to withdraw, Tata Sons would be required to find a purchaser of Docomo's shares for the greater of either the fair market value of the shares or 50% of the initial purchase price of the shares.
In 2014, when Tata Teleservices failed to reach its targets, Docomo opted to exit the venture, triggering Tata Sons' obligation to find a purchaser. When Tata Sons failed to do so, Docomo initiated arbitration to the London Court of Arbitration under the London Court of International Arbitration Rules.
At the arbitration, Tata Sons argued that a share transfer of this nature offended the Indian Foreign Exchange Management Act, 1999 ("FEMA") with respect to the transfer of securities. The Arbitral Tribunal rejected that submission. The tribunal ultimately found that Tata Sons breached the agreement when it failed to find a purchaser, and ordered that it pay damages to Docomo in the amount of 50% of the initial purchase price, being approximately $1.18B USD. Docomo was also ordered to transfer its shares to Tata Sons.
The Enforcement Proceedings
Docomo applied to enforce the Award in India at the High Court of Delhi. India is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
While Tata Sons initially opposed the enforcement on...