LOOP’s investor initiates international arbitration proceedings against Indian government

Loop Telecom’s investor Khaitan Holdings (Mauritius) Limited (KHML) has initiated an international arbitration proceedings against the Government of India, seeking  damages of $1 billion for 2G licences which it had invested but were cancelled by Supreme Court on February 2, 2012.

KMHL holds 26.95% stake in Loop and its all 21 telecom 2G licences have been cancelled by the apex court. It has been estimated that the loss of the market value of the licences exceeds $100 billion.

The Mauritius-based investor following the cancellation of all Loop licenses by the Apex Court, first served notice to the Government in April 2012 for resolving disputes under Bilateral Investment Promotion and Protection Agreements (BIPA). Mauritius-based Kaif Investments and Capital Global, majority investor in Loop Telecom had also served notice under BIPA in April 2012, following which government representatives have held three rounds of discussion.

Despite holding several meetings with the representatives of the government, Loop’s investor failed to arrive to any conclusive decision at resolving the dispute amicably.  Following the failure KHML has invoked international arbitration and offered to hold arbitration outside India in London or Dubai. The firm has followed arbitration under United Nations Commission on International Trade Law.

Government had decided to adjust the money of telecom operators affected by the apex court order, if they participate in spectrum auctions. This was to address concerns raised by foreign investors affected by the apex court judgement.

Loop Telecom, however, opted out of both auctions that were held in November 2012 and March 2013 respectively and hence could not benefit from the government’s decision.