Reliance Industries seeks immediate start of D6 cost recovery arbitration

New Delhi: With its KG-D6 cost recovery arbitration stuck for three years, Reliance Industries has sought immediate start of the proceedings for early resolution of the dispute. Naming former UK judge Sir Bernard Rix as its arbitrator in place of former Chief Justice of India SP Bharucha, who quit earlier this month, RIL through its legal counsel has written to the Oil Ministry seeking start of the proceedings from next month, sources privy to the development said. [caption id=“attachment_1970877” align=“alignleft” width=“380”]  KG-D6. Reuters image[/caption] Bharucha was earlier RIL nominee on a three-member arbitration panel, which is to decide if the oil ministry was right in disallowing over $2.3 billion of KG-D6 cost as output lagged targets. He, however, recused himself after the government challenged his nomination more than two-and-half years after his nomination. The government felt he had not disclosed all previous associations with RIL and that his arbitration could create doubts about his independence and impartiality. The company, in the letter, expressed “distress” at the attempts of the government to remove Justice Bharucha from the panel of arbitration, sources said. Bharucha, it said, has an impeccable reputation and it was “unfortunate” that the government chose to demonstrate, in the course of an international arbitration, that it did not have faith in a former chief justice. Bharucha was nominated as an arbitrator on November 23, 2011 and the correspondence relating to his disclosures ended in June this year. This month, the government sought his removal from the panel of arbitrators, leading to his resignation. RIL in the letter also said that the former chief justice of India VN Khare, who is the government’s nominee on panel, did not respond to Bharucha’s attempts to agree to appointing a Chairman of the panel resulting in considerable delay. RIL said it was not challenging Khare’s continuance at this stage in the the interest of the arbitration process. Rix and Khare will sit on a three-member arbitration panel headed by Supreme Court-appointed neutral arbitrator Michael Kirby, a former Judge of an Australian High Court. The arbitration is yet to start. RIL had challenged the government notice to disallow cost through a Notice of Arbitration on 23 November, 2011 saying the signed contract does not provide for output targets and there was no provision for disallowing any part of cost because of production not being in line with output guidance. The government initially did not join the arbitration within the stipulated 30 days as provided under the Production Sharing Contract (PSC) but relented after RIL moved Supreme Court for appointment of the second arbitrator. However, Justice (rtd) Bharucha and Justice (rtd) Khare failed to agree on the name of the third presiding arbitrator for 13 months and RIL again moved the Supreme Court on 8 August, 2013. Earlier this year, former Australian judge Michael Hudson McHugh was named as the presiding arbitrator but he withdrew after government counsel objected to his remaining on the panel after initially refusing to accept the appointment. The Supreme Court in September appointed retired judge Michael Kirby of Australia as chairman of arbitral tribunal. Sources said the government raised objection to Justice Bharucha after two and half years after his appointment. RIL says it had made full disclosure of all previous dealings with its Arbitrator. The company had filed a separate arbitration notice on 9 May over delays in approving revision in KG-D6 gas price. For this arbitration, RIL named Sir David Steel and the government named Justice GS Singhvi as their arbitrators. The two have failed to agree on a third arbitrator and RIL has filed a petition in the Supreme Court seeking such appointment. PTI Disclosure: Network 18, which publishes Firstpost and Firstbiz, is part of the Reliance Group