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I TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY (TIMCCE)
2018
MEMORIAL FOR THE APPELLANT
IN THE MATTER OF APPEAL BEFORE THE HON'BLE SUPREME COURT OF
INDIANA BETWEEN:
STATE OF DELAWARE AND NORTH ATLANTIC EDISON INC ... APPELLANT
V.
THERMAL POWER CORPORATION (TPC) ... RESPONDENT
MEMORANDUM ON BEHALF OF THE APPELLANT
II TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
TABLE OF CONTENTS
TABLE OF AUTHORITIES.......................................................................................................................IV
LIST OF CASES.....................................................................................................................................IV
STATUTES:............................................................................................................................................VI
BOOKS:...................................................................................................................................................VI
MISCELLANEOUS:..............................................................................................................................VII
Conventions:............................................................................................................................................IX
STATEMENT OF JURISDICTION...........................................................................................................XI
125. Appeal to Supreme Court:...............................................................................................................XI
QUESTIONS PRESENTED......................................................................................................................XII
Whether Appellant (State of Delaware) justified in seeking for the cancellation of the long term purchase agreement with Thermal Power Corporation?........................................................................XII
Whether North Atlantic Edison Inc is correct in approaching through UK government to seek relief under Bilateral Agreements?..................................................................................................................XII
Whether State Government has any other option to deal with the situation rather than cancelling the long term agreements?............................................................................................................................XII
STATEMENT OF FACTS.......................................................................................................................XIII
SUMMARY OF PLEADINGS..............................................................................................................XVIII
1. Whether the appellant (State of Delaware) justified in seeking for the cancellation of the long term purchase agreement with Thermal Power corporation?.....................................................................XVIII
2. Whether North Atlantic Edison Inc is correct in approaching through UK government to seek relief under Bilateral Agreements?....................................................................................................XVIII
3. Whether state government has any other option to deal with the situation rather than cancelling the long term agreements?.........................................................................................................................XIX
PLEADINGS.................................................................................................................................................1
1. WHETHER THE APPELLANT JUSTIFIED IN SEEKING FOR THE CANCELLATION OF THE LONG TERM PURCHASE AGREEMENT WITH RESPONDENT?............................................1
I. THAT PPA IS NOT IN ACCORDANCE WITH NATIONAL ELECTRICITY POLICY..........1
II. THAT PPA IS NOT IN ACCORDANCE WITH NATIONAL TARIFF POLICY......................3
III. THAT PPA IS NOT IN ACCORDANCE WITH THE ELECTRICITY ACT, 2003...............6
IV. THAT PPA IS IN VIOLATION OF SECTION 60...................................................................8
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III TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
V. THAT PPA IS VOID UNDER SECTION 23 OF THE CONTRACT ACT, 1872.....................10
2. WHETHER NORTH ATLANTIC EDISON INC. IS CORRECT IN APPROACHING THROUGH UK GOVERNMENT TO SEEK RELIEF UNDER BILATERAL AGREEMENTS?.......12
I. THAT THE HON’BLE COURT MAY CONSENT FOR ARBITRATION:.............................12
II. THE PARTIES TO THE ARBITRATION AND RELATED ENTITIES:.................................15
III. THE BASIS FOR THE ARBITRATION, THE APPLICABLE LAW AND TREATY V. CONTRACT........................................................................................................................................15
IV. APPELLANTS' CLAIMS AGAINST THE GOVERNMENT...............................................18
3. WHETHER STATE GOVERNMENT HAS ANY OTHER OPTION TO DEAL WITH THE SITUATION RATHER THAN CANCELLING THE LONG TERM AGREEMENT?........................26
PRAYER......................................................................................................................................................33
MEMORANDUM ON BEHALF OF THE APPELLANT
IV TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
TABLE OF AUTHORITIES
LIST OF CASES
1. Adani Power Limited vs. Uttar Haryana BijliVidyut Nigam Limited and ors;Coastal
Gujarat Power Limited vs Gujarat UrjaVikas Nigam Limited and Ors………………41
2. Alpha Projektholding v. Ukraine, ICSID Case No. ARB/07/16, Award, 8 November
2010……………………………………………………………………………………34
3. Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision
on Liability, 14 December 2012, para. 396………………………………………..…..38
4. CIT Bombay v. Mahindra and Mahindra Ltd. (1983) 4 SCC 392 at 394……………...19
5. CMS v. Argentina; National Grid v. Argentina, UNCITRAL, Award ¶ 176-179 (Nov. 3,
2008) [hereinafter CMS Award]……………………………………………………….34
6. El Paso v. Argentina, CMS v. Argentina……………………………………………….38
7. Eureko B.V. v. Poland, Partial Award, and 19 August 2005……………………..…….37
8. Gujarat UrjaVikas Nigam Ltd. v. Solar Semiconductor Power company India Pvt. Ltd.
and ors., Supreme Court, Civil Appeal No. 6399 of
2016…………………………………………………..…………………………..……..40
9. India Financial Assn., Seventh Day Adventists v. M.A Unneerikutty (2006) 6 SCC
351………………………………………………………………………………….…...22
10. International Thunderbird Gaming Corporation v. United Mexican States, UNCITRAL,
Arbitral Award (Jan. 26, 2006)…………………………………………………….……34
11. Lauder v. Czech Republic, UNCITRAL, Award, 3 September 2001, ¶ 221; Plama
Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, ¶
184……………………………………………………………………………………….34
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V TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
12. Methanex Corporation v. United States (Final Award of the Tribunal on Jurisdiction and
Merits, 3 Aug. 2005) [Methanex] at Part IV – Chapter C, para. 25……………………..35
13. Noble Ventures, Inc. v. Romania, Award October 12, 2005 ICSID Case No ARB/
01/11…………………………………………………………………………………….37
14. North Delhi Municipal Corporation v. Prem Chand Gupta 2017 Scc Online Del
9154……………………………………………………………………………………..22
15. North Delhi Municipal Corporation v. Prem Chand Gupta 2017 Scc Online Del
9154……………………………………………………………………………………....23
16. Occidental Exploration and Production Company v. Equador, LCIA Case No UN 3467,
Final Award on 1st July 2004………………………………………………………….…34
17. Perenco Ecuador Ltd. v. The Republic of Ecuador and EmpresaEstatalPetróleosdel
Ecuador (Petroecuador) (ICSID Case No. ARB/08/6)……………………………..……38
18. Raja Mohan @ Mohan vs The Divisional Engineer on 9 March, 2016……………….…..42
19. RamakantKini v. Hiranandani Hospital, Case No. 39 of 2012…………………………21
20. Romak S.A. (Switzerland) v. The Republic of Uzbekistan (UNCITRAL, PCA Case No.
AA280), Award, 26 November 2009, para. 207……………………………………..….30
21. Salini v. Morocco……………………………………………………………………..…30
22. Sempra Energy International v. Republic of Argentina, ICSID case No ARB/02/16,
Decision on Objections to Jurisdiction, 11 May 2005……………………………..……36
23. Sempra Energy International v. Republic of Argentina, ICSID case No ARB/02/16,
Decision on Objections to Jurisdiction, 11 May 2005……………………….…………..38
24. SGS SociétéGénérale de Surveillance S.A. v. Islamic Republic of Pakistan (ICSID Case
No. ARB/01/13) Procedural Order No.2 dated 16 October 2002………………………..26
25. SGS SociétéGénérale de Surveillance, S.A. v. the Republic of the Philippines, ICSID
case No. ARB/02/6, Decision on Jurisdiction, 29 January 2004 available at
www.worldbank.org/icsid/cases/SGSvPhil-final.pdf........................................................36
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VI TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
26. SGS SociétéGénérale de Surveillance, S.A. v. the Republic of the Philippines, ICSID
case No. ARB/02/6, Decision on Jurisdiction, 29 January 2004 available at
www.worldbank.org/icsid/cases/SGSvPhil-final.pdf.......................................................38
27. Starrett Housing v. Iran, Interlocutory Award No. ITL 32-24-1, 19 December 1983, 4
Iran-United States Claims Tribunal Reports 122, p. 154…………………….………….38
28. The Campaign for Nuclear Disarmament v. The Prime Minister of the United Kingdom,
[2002] EWHC 2777 (Admin)……………………………………………………………25
29. Tin Council Case [J.H. Rayner (Mincing Lane) Ltd. v. Department of Trade & Industry
&Ors ,[1990] 2 AC 418 (House of Lords). …………………………………….………24
30. Torrent Power Limited v. Gujarat Electricity Regulatory Commission Appeal No. 68 of
2009………………………………………………………………………………………18
31. TPC Ltd. v. Reliance Infra Ltd. Case No. 13 of 2010…………………………………...21
32. Uttar Haryana BijliVitran Nigam v. CERC 2016 Scc Online APTEL 94 ……………....19
STATUTES:
1. The Electricity Act, 2003.
2. The Competition Act, 2002.
3. The National Electricity Policy.
4. Vienna Convention on the Law of Treaties.
5. Responsibility of States for Internationally Wrongful Acts.
6. UNCITRAL Arbitration Rules 1976.
7. Constitution of India,1950.
BOOKS:
1. BARUCHA, NAUSHIR, “GUIDE TO ELECTRICITY LAWS”.
2. BASU, “COMMENTARY ON ELECTRICITY LAWS OF INDIA”.
MEMORANDUM ON BEHALF OF THE APPELLANT
VII TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
3. BECK, HART, NOMOS, “INTERNATIONAL COMMERCIAL ARBITRATION”.
4. BECK, HART, NOMOS, “INTERNATIONAL INVESTMENT LAW”.
5. CHATTERJEE’S, “THE ELECTRICITY LAWS OF INDIA”.
6. AIYAR, KRISHNAMURTHY, “LAWS RELATION TO ELECTRICITY IN INDIA”
7. CHOUKROUNE, LAILA, “JUDGING THE STATE IN INTERNATIONAL TRADE
AND INVESTMENT LAW”.
8. COLLINS, DAVID,“AN INTRODUCTION TO INTERNATIONAL INVESTMENT
LAW”.
9. GAZZINI, TARCISIO, “INJTERPRETATION OF INTERNATIONAL INVESTMENT
TREATIES”.
10. SCHILL STEPHEN, THE MULTILATERALIZATION OF INTERNATIONAL
INVESTMENT LAW.
11. SCHILL, STEPHEN W., “ENABLING PRIVATE ORDERING: FUNCTION, SCOPE
AND EFFECT OF UMBRELLA CLAUSES IN INTERNATIONAL INVESTMENT
TREATIES.” 18 MINN. J. INT’L L.1 (2009), P. 35.
12. TANEJA, RAMNI, “FOREIGN DIRECT INVESTMENT AND GLOBALISATION”.
13. TWEDDALE, TWEDDALE, “ARBITRATION OF COMMERCIAL DISPUTES”.
MISCELLANEOUS:
1. Agreement between the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of the Republic of India for the Promotion and
Protection of Investments 1994.
2. Amulya K.N. Reddy and Gladys D. Sumithra, Karnataka’s Power Sector: Some
Revelations, Economic and Political Weekly, Vol. 32, No. 12 (Mar. 22-28, 1997), pp.
585-600.
3. Ankita Gupta et. al., Effectiveness of High Voltage in Distribution System: High Voltage
Distribution System, IOSR Journal of Electrical and Electronics Engineering, Volume 1,
Issue 5 (July-Aug. 2012), PP 34-38 (www.iosrjournals.org).
MEMORANDUM ON BEHALF OF THE APPELLANT
VIII TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
4. BerkDemirkol, the Notion of ‘Investment’ in International Investment Law (February 1,
2015). (2015) I Turkish Commercial Law Review 41.
5. Bernasconi-Osterwalder, N. (2014), State-State Dispute Settlement Clause in Investment
Treaties (IISD Best Practices Series). Geneva and Winnipeg: IISD. Retrieved from
http://www.iisd.org/sites/default/files/publications/ best-practices-state-state-dispute-
settlement-investment-treaties.pdf.
6. Consultation paper on Additional Surcharge, Available at
https://powermin.nic.in/sites/default/files/webform/notices/Seeking_Comments_on_Cons
ultation_paper_on_issues_pertaining_to_Open_Access.pdf.
7. Delhi Electricity Regulatory Commission, Approach Paper on Tariff Rationalization,
February 2018,
http://www.derc.gov.in/Public%20Notice/Tariff%20Rationalization/Approach%20Paper
%20on%20Tariff%20Rationalisation.pdf.
8. Delhi Electricity Regulatory Commission, Approach Paper on Tariff Rationalization,
February 2018,
http://www.derc.gov.in/Public%20Notice/Tariff%20Rationalization/Approach%20Paper
%20on%20Tariff%20Rationalisation.pdf.
9. Edward Malley and David Zarider, Decommissioning Obsolete Power Plants Why Do it
Now?; See Also U.S. Energy Information Administration/Electric Power Annual 2009,
North American Electric Reliability Corporation 2010 .
10. Explanatory Memorandum to the draft Central Electricity Regulatory Commission
(Prevention of Adverse Effect on Competition) Regulations, 2012.
11. Expropriation, UNCTAD Series on Issues in International Investment Agreements II- A
Sequel (2012) p. 11.
12. Government of India, Ministry of Power, National Electricity Policy (12th February
2005).
13. Luiz T.A. Maurer and Luiz A. Barroso,ElectricityAuctions:An overview of efficient
practices, A World Bank Study.
14. PoonamShivaji et al., Wireless SCADA: Review Paper, International Journal for
Scientific Research and Development, Volume 5 Issue 11 Pg. 751-753.
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IX TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
15. Santosh B Belekaret. al., PLC and SCADA based distribution and control,
Multidisciplinary Journal of Research in Engineering and Technology Volume 1, Issue 1
(April 2014) Pg. 105-110.
16. Sarita Singh, PPA Auction for stressed power stations gets bids for 2200 MW, The
Economic Times (Jun 27, 2018).
17. Sethi, SP (2016): ‘We Simply Deserve Better: Challenges in Coal and Power Sectors’,
Economic & Political Weekly, 51(25): 12-16.
18. TarunAgarwal, Scada Applications in Power Sector,Edgefx Technologies Pvt.
Ltd.,Online: https://www.edgefx.in/scada-applications-in-power-system/.
CONVENTIONS:
1. Bilateral Investment Promotion & Protection Treaty
2. United Nations Commission on International Trade Law (UNCITRAL) Arbitration
Rules, 1976
3. Articles on Responsibility of States for Internationally Wrongful Acts.
4. Vienna Convention on Law of Treaties
5. International Centre for Settlement of Investment Disputes
6. Bilateral Investment Treaty
7. UNCTAD
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LIST OF ABBREVIATIONS
DEB : Delaware Electricity Board
PPA : Power Purchase Agreement
AT&C : Aggregate Technical & Commercial
CERC : Central Electricity Regulatory Commission
SERC : State Electricity Regulatory Commission
DISCOMS : Distribution Companies
EA : Electricity Act
GENCO’s : Generation Companies
CCI : Competition Commission of India
BIT : Bilateral Investment Treaty
ICSID : International Centre for Settlement of Investment Disputes
VCLT : Vienna Convention on the Law of Treaties,
UNCITIRAL : United Nations Commission on International Trade Law
ARSIWA : Responsibility of States for Internationally Wrongful Acts
APTEL : APPELLATE TRIBUNAL FOR ELECTRICITY
SCADA : The Supervisory Control And Data Acquisition
FET : Fair and Equitable Treatment
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XI TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
STATEMENT OF JURISDICTION
North Atlantic Inc. and State Government of Delaware on its own behalf most respectfully
submit to jurisdiction of this Hon'ble Supreme Court of Indiana under Section 125 of the
Electricity Act, 2003.
Section 125 of the Act reads as follows:
125. Appeal to Supreme Court:
Any person aggrieved by any decision or order of the Appellate Tribunal, may, file an appeal to
the Supreme Court within sixty days from the date of communication of the decision or order of
the Appellate Tribunal, to him, on any one or more of the grounds specified in section 100 of the
Code of Civil Procedure,1908:
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.
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XII TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
QUESTIONS PRESENTED
-I-
WHETHER APPELLANT (STATE OF DELAWARE) JUSTIFIED IN SEEKING FOR THE
CANCELLATION OF THE LONG TERM PURCHASE AGREEMENT WITH THERMAL
POWER CORPORATION?
-II-
WHETHER NORTH ATLANTIC EDISON INC IS CORRECT IN APPROACHING
THROUGH UK GOVERNMENT TO SEEK RELIEF UNDER BILATERAL
AGREEMENTS?
-III-
WHETHER STATE GOVERNMENT HAS ANY OTHER OPTION TO DEAL WITH THE
SITUATION RATHER THAN CANCELLING THE LONG TERM AGREEMENTS?
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XIII TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
STATEMENT OF FACTS
A. THE DISPUTE
1. Beginning in 2003, the Republic initiated a process of privatizing certain state-owned
enterprises. This process included representations and promises to foreign investors to
entice and encourage them to invest in the Republic. These representations and promises
were made by and with the approval of the Republic and could only be delivered by the
Republic. Indeed, the then Government, acknowledged the Republic's continuing
responsibility for actions concerning the electricity sector.
2. Since 2003, the Republic reformed and privatized DEB’s generation transmission and
distribution assets. During this time, the Republic established a comprehensive set of
laws and regulations further designed to cause potential investors to invest in the
electricity sector of the Republic and to rely on the regulatory framework that the
Republic created.
3. In 2003, the then Government opened a competitive bidding under which the Delaware
Electricity Board was privatized and was taken over by North Atlantic Edison Inc, an UK
based energy company and this bidding process promised a "regulatory framework,
which will be known by the pre-qualified bidders, and will be the guarantee of the
investments in the sector.
4. The Government has embarked on a bold initiative to restructure the entire electricity
sector. The primary goals of the new structure are to create a competitive market in
generation, create a rational regulatory framework for distribution, and provide capital
needed for needed improvements to the system. The Republic also declared that the
purpose the tariff setting process was to "provide a simplified regulatory scheme and
tariff setting process which limits the discretionary role of the Government through the
establishment of objective criteria for setting prices in a manner which results in an
economically efficient allocation of resources within the electricity sector."
5. The Republic has repeatedly represented that it would enforce the laws and regulations
necessary to reduce the level of theft in the country. The PPA stated "Regulation is in
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XIV TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
place to ensure that the distribution companies will be able to collect unpaid invoices and
that institution would enforce the legal and regulatory framework that the Republic
established.
6. In its representations to investors, the Republic also repeatedly projected that by today,
AT&C losses would fall to a small fraction of their historically high levels. For example
as per the Government Report, the AT&C Losses have come down from 53% to 9% from
2003 to 2016.
7. During the privatization process, the Republic recognized the problems caused by
electricity theft and the necessity for enforcement of the law to effectively manage the
electricity sector. Likewise, representatives of the Republic have made numerous public
statements regarding the necessity for and importance of preventing the theft of
electricity as well as the problems created due to the Republic's failure to apply the "rules
of the game" that the Republic approved and implemented.
8. Despite the Republic's rhetoric about improving enforcement, theft in the electricity
sector has not been curtailed or deterred, and it continues - on a daily and going-forward
basis - to create losses to the Claimants.
9. The Republic consistently has promised measures to curtail the theft and then reneged.
Distributors, such as the Claimants, who have relied upon and continue to rely on such
promises, continue to suffer the consequences of the Republic's actions as well as its
failure to act.
B. THE CREATION OF NORTH ATLANTIC EDISON INC. AND ITS RELATIONSHIP
WITH THE REPUBLIC
10. The purpose of the Republic's promulgation of the laws, resolutions and entities
described above was to establish a predictable regulatory system to attract the funds
needed for the privatization of the Republic's electricity system by foreign investors in
2003 and to maintain a stable framework for the electricity sector's viability.
11. Pursuant to the Reform Law and following the directives issued by Government, the DEB
formed different subsidiaries. The DEB then proceeded to transfer all of its distribution
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assets under the competitive bidding. All generation and transmission assets remained
with DEB.
12. The Republic invited foreign private companies to participate in the privatization by
contributing financial capital to the new electricity distribution companies. In exchange
for their investment, the private investors would receive 51% of the outstanding common
stock of each company.
13. The private investors that invested in the electricity industry were to be given
management control over the newly-formed electricity companies through special
provisions in the companies' by-laws and through the execution of management
agreements between each of the subsidiaries and the individual foreign investors.
C. THE REPUBLIC'S AGREEMENTS WITH NORTH ATLANTIC EDISON INC.
11. In 2003, the Government announced that North Atlantic Edison Inc., a UK based
Company was the winners of the competitive bidding for the selection of the private.
12. The basic contracts are:
a. the PPA, which was signed between the Republic of Indiana and the North
Atlantic Edison Inc.
b. the Privatization Agreement signed between the Republic of Indiana and the North
Atlantic Edison Inc.
13. The Basic Contracts reflected the fulfilment of the Republic's stated public policy to
privatize the electricity sector by forming joint ventures with foreign investors, to
establish a new long-term structure for the electricity sector, and to guarantee certain
rights to North Atlantic Edison Inc. The North Atlantic Edison Inc. relied on the long-
term regulatory structure and the commitments made by the Republic when making
its investment in DEB in 2003. The Republic has renewed publicly its commitment to
these reforms, and Claimants relied on the Republic's repeated affirmations when
investing in the sector in 2003.
D.THE POWER PURCHASE AGREEMENT
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XVI TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
14. In 2003, the DEB and North Atlantic Edison Inc. executed the Power Purchase
Agreement. In the PPA, the Republic declared that, through the Government, it
intended to: as a matter of policy, involve the private sector in the restructuring and
operation of the electricity distribution permitting new private sector capital to
rehabilitate and extend the distribution system, which creates a competitive electricity
market that awards efficiency and good management.
15. In the PPA, the Republic agreed to establish North Atlantic Edison Inc. and transfer
to it certain electricity distribution assets, including operating licenses, and certain
liabilities.
16. North Atlantic Edison Inc. was fully aware of the contents of the Basic Contracts on
the date of the bid, and its decision to make its bid and subsequently enter into the
PPA was premised upon its understanding that upon its investment in DEB these
agreements would be executed.
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SUMMARY OF PLEADINGS
1. WHETHER THE APPELLANT (STATE OF DELAWARE) JUSTIFIED IN
SEEKING FOR THE CANCELLATION OF THE LONG TERM PURCHASE
AGREEMENT WITH THERMAL POWER CORPORATION?
It is humbly submitted that the Appellant Company moves this Hon’ble Court to seek the relief
of cancellation of long term power purchase agreement between the Appellant Company and
Respondent (“PPA”) in reversal of the Order passed by the Appellate Tribunal.The PPA in its
present shape is not in accordance withNational Electricity Policy, 2005 (“National Electricity
Policy”),the National Tariff Policy, 2016 (“National Tariff Policy”) and the Electricity Act,
2003 (“Electricity Act”);is in contravention of Section 60 of Electricity Act, as it is anti-
competitive and abuses dominance;against “public policy” in contravention to Section 23 of
Indian Contract Act, 1872.The humble request of termination of PPA is being taken in view of
“public policy” and that termination is not barred by Electricity Act.
2. WHETHER NORTH ATLANTIC EDISON INC IS CORRECT IN APPROACHING
THROUGH UK GOVERNMENT TO SEEK RELIEF UNDER BILATERAL
AGREEMENTS?
It is humbly submitted before this Honorable Court that the appellant seeks permission of the
court to initiate state-state arbitration between Government of UK and Government of Indiana
under Article 10 of Bilateral Investment Promotion & Protection Agreement 1(hereinafter
referred as BIPA) entered on 14 march 1994 under structured rules modeled on the United
Nations Commission on International Trade Law (UNCITRAL) arbitration rules.
1 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Promotion and Protection of Investments 1994.
MEMORANDUM ON BEHALF OF THE APPELLANT
XIX TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
3. WHETHER STATE GOVERNMENT HAS ANY OTHER OPTION TO DEAL WITH
THE SITUATION RATHER THAN CANCELLING THE LONG TERM
AGREEMENTS?
It is humbly submitted that the PPA entered into by the previous government obligate the
appellant to pay a higher purchasing cost than the market price thereby leading to increasing
regulatory assets. However, the state government may also revise the tariff in the PPA in
accordance with Section 61 of the Electricity Act, it may also order pooling of the current source
along with a cheaper source to make the power purchasing cost affordable in the larger public
interest. It may also work towards achieving technological development of the distribution
infrastructure and may order Renovation, Modernization or Decommissioning of costly
generating plants along with replacing them with more efficient and cost effective plants or
doing an Auction of the generating plants through PPA.
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1 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
PLEADINGS
1. WHETHER THE APPELLANT JUSTIFIED IN SEEKING FOR THE
CANCELLATION OF THE LONG TERM PURCHASE AGREEMENT
WITH RESPONDENT?
It is humbly submitted that the Appellant Company moves this Hon’ble Court to seek the relief
of cancellation of long term power purchase agreement between the Appellant Company and
Respondent (“PPA”) in reversal of the Order passed by the Appellate Tribunal. The PPA in its
present shape is not in accordance with:
(a) relevant laws governing the electricity sector, i.e. the National Electricity Policy, 2005
(“National Electricity Policy”),the National Tariff Policy 2016 (“National Tariff
Policy”) and the Electricity Act, 2003 (“Electricity Act”);
(b) is in contravention of Section 60 of Electricity Act, as it is anti-competitive and abuses its
dominant position;
(c) against “public policy” in contravention to Section 23 of Indian Contract Act, 1872.
The humble request of termination of PPA is being taken in view of “public policy” and
that termination is not barred by Electricity Act.
I. THAT PPA IS NOT IN ACCORDANCE WITH NATIONAL ELECTRICITY
POLICY
It is most humbly submitted before this Hon’ble Court that the PPA between the Appellant
Company and Respondent is not in concurrence with the National Electricity Policy.
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2 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
1. Relevant objectives of the Policy are:
“(c) Supply of reliable and Quality power of specified standards in an efficient manner
and at reasonable rates;
(f) Financial turnaround and commercial viability of Electricity sector”
A. RETURN ON INVESTMENT:
2. The National Electricity Policy further in Para 5.4.4 states:
“Conducive business environment in terms of adequate returns and suitable transitional
model with predetermined improvements in efficiency parameters in distribution business
would be necessary for facilitating funding and attracting investments in distribution.
Multi-Year Tariff (MYT) framework is an important structural incentive to minimize
risks for utilities and consumers, promote efficiency and rapid reduction of system losses.
It would serve public interest through economic efficiency and improved service quality.
It would also bring greater predictability to consumer tariffs by restricting tariff
adjustments to known indicators such as power purchase prices and inflation indices.
B. ATTRACTING PRIVATE SECTOR INVESTMENT:
3. The National Electricity Policy in Para 5.8.4 states
“Capital is scarce. Private sector will have multiple options for investments. Return on
investment will, therefore, need to be provided in a manner that the sector is able to attract
adequate investments at par with, if not in preference to, investment opportunities in other
sectors. This would obviously be based on a clear understanding and evaluation of
opportunities and risks. An appropriate balance will have to be maintained between the
interests of consumers and the need for investments.”
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4. The above are some of the provisions of the National Electricity Policy, which make
it amply clear that the distribution licensee has the right to adequate return on its
investment in order to sustain effectively and efficiently in the power market.2
5. Further, there is a responsibility on the distribution licensee to provide power at a
competitive rate to the consumer3. In addition, the distribution licensee has obligation
to provide subsidies power to rural and to consumers below poverty line below
poverty4. The above obligations can only be satisfied when distribution licensee is
able to procure power at an economic rate.
II. THAT PPA IS NOT IN ACCORDANCE WITH NATIONAL TARIFF POLICY
1. The National Tariff Policy not only aims at ensuring that consumer pay only
reasonable charges but also emphasizes on attracting and maintaining adequate
investments in the market.
2. Para 1.4 of the National Tariff Policy provides:
“Balancing the requirement of attracting adequate investments to the sector and
that of ensuring reasonability of user charges for the consumers is the critical
challenge for the regulatory process. Consistency in approach becomes all the
more necessary considering the large number of States and the diversities
involved.”
3. The National Tariff Policy further lays down the framework for performance based
cost of service regulation in respect of aspects common to generation, transmission as 2Para 5.4.4 and 5.4.8 of National Electricity Policy3Para 1.2 National Electricity Policy4Para 5.5.2 National Electricity Policy
MEMORANDUM ON BEHALF OF THE APPELLANT
4 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
well as distribution in Para 5.11. These are not applicable to competitive bidding
projects.
A. RETURN ON INVESTMENT:
4. Balance needs to be maintained between the interests of consumers and the need for
investments while laying down rate of return. Return should attract investments at par
with, if not in preference to, other sectors so that the electricity sector is able to create
adequate capacity. The rate of return should be such that it allows generation of
reasonable surplus for growth of the sector. The Central Commission would notify,
from time to time, the rate of return on equity for generation and transmission
projects keeping in view the assessment of overall risk and the prevalent cost of
capital which shall be followed by the SERCs also.
5. The rate of return notified by CERC for transmission may be adopted by the SERCs
for distribution with appropriate modification taking into view the risks involved. For
uniform approach in this matter, it would be desirable to arrive at a consensus through
the Forum of Regulators. While allowing the total capital cost of the project, the
Appropriate Commission would ensure that these are reasonable and to achieve this
objective, requisite benchmarks on capital costs should beevolved by the Regulatory
Commissions.
6. The Central Commission may adopt either Return on Equity5 or Return on Capital6
approach whichever is considered better in the interest of the consumers. The State
Commission may consider 'distribution and supply margin' as basis for allowing
5 ROE is better suited in fluctuating interest rate regime because the ROE is insulated from Interest rate changes.6 Under the ROCE approach the utility/project developers has to devise their financial package, i.e., Debt/Equity ratio, sourcing debt at competitive interest rates, etc. Thus, it is a win-win situation for both the project developer and buyers. Moreover, CERC may also exercise prudent check while determining the Capital Employed in the project.
MEMORANDUM ON BEHALF OF THE APPELLANT
5 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
returns in distribution business at an appropriate time. The State Commission may
also consider price cap regulation based on comprehensive study. The Forum of
Regulators should evolve a comprehensive approach in this regard. The
considerations while preparing such an approach would, inter-alia, include issues
such as reduction in Aggregate Technical and Commercial losses, improving the
standards of performance and reduction in cost of supply.
B. MULTI-YEAR TARIFF:
7. Section 61 of the Act states that the Appropriate Commission for determining the
terms and conditions for the determination of tariff shall be guided, inter-alia, by
Multi-Year Tariff (MYT) principles. The framework should feature a five-year
control period. The initial control period may, however, be of 3 year duration for
transmission and distribution if deemed necessary by the Regulatory Commission on
account of data uncertainties and other practical considerations.
8. Once the revenue requirements are established at the beginning of the control period,
the Regulatory Commission should focus on regulation of outputs and not the input
cost elements. At the end of the control period, a comprehensive review of
performance may be undertaken.
9. Uncontrollable costs should be recovered speedily to ensure that future consumers are
not burdened with past costs. Uncontrollable costs would include (but not limited to)
fuel costs, costs on account of inflation, taxes and cess, variations in power purchase
unit costs including on account of adverse natural events.7
10. In view of the above, please note that the tariff for the PPA was initially determined
by the regulatory body in accordance with the Electricity Act and the National Tariff
Policy. However, subsequently, the government in violation of the above National
Tariff Policy and Electricity Act, froze the tariff thus resulting in accumulations of
regulatory assets. As a result of which power purchase cost has increased threefold
whereas the tariffs has risen only 90% so far.
7 Torrent Power Limited v. Gujarat Electricity Regulatory Commission Appeal No. 68 of 2009
MEMORANDUM ON BEHALF OF THE APPELLANT
6 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
III. THAT PPA IS NOT IN ACCORDANCE WITH THE ELECTRICITY ACT,
2003
1. The tariff is governed by provision of Chapter 7 of the Electricity Act, 2003. Section
62 of the Act sets out the various parameters for Regulatory body to determine the
tariff. The Appropriate Commission is guided by the following:
(b) the generation, transmission, distribution and supply of electricity are conducted
on commercial principles;
(c) the factors which would encourage competition, efficiency, economical use of
the resources, good performance and optimum investments;
(d) safeguarding of consumers' interest and at the same time, recovery of the cost
of electricity in a reasonable manner;
(f) multi-year tariff principles;
2. It is most respectfully brought to the attention of the Court that the tariff under the
PPA does not reflect the above requirements set out in law:
A. COMMERCIAL PRINCIPLES:
3. The tariff charged by the Respondent does not follow any commercial principle as the
Appellant Company is unable to recover the cost of power purchase. Very high level
of technical and commercial losses and lack of commercial approach in management
of utilities has led to unsustainable financial operations of distribution
entities.8Discoms’ financial mess is more because of their operational inefficiencies
and high wholesale price of power in India.9 The tariff at which the Appellant
Company is procuring electricity will not prove to be financially feasible.
8National Electricity Policy9Sethi, SP (2016): ‘We Simply Deserve Better: Challenges in Coal and Power Sectors’, Economic & Political Weekly, 51(25): 12-16.
MEMORANDUM ON BEHALF OF THE APPELLANT
7 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
4. Financial viability consists of 3 interdependent elements of equal importance i.e.
profitability, liquidity and solvency which are represented by cash profit or loss, net
working capital and net worth respectively.10 The Appellant Company has regulatory
assets worth Rs. 15000 Crores and as per estimates, for liquidation of which they
would need to hike tariff by 10% every year for 5 years.11
5. In LancoAmarkantak Power Ltd. v. Haryana Electricity Regulatory Commission12,
the Aptel highlighted the importance of the commercial viability13 of a project under
PPA and henceforth, allowed the petition for re-determination of tariff as it was
commercially infeasible to continue at the agreed rates under PPA.
6. Presently, Delaware is incurring 60% more cost on buying power compared with
other states because of long term power purchase agreements.14 Therefore, it is not
commercially viable, and has led to declaration of regulatory assets of nearly
15000cr.
B. ENCOURAGE COMPETITION:
7. The high cost of tariff makes the power of the appellant commercially unattractive in
the market and therefore, leads to operational losses with respect to open access and
non-open access consumers.
C. CONSUMER INTEREST:
8. The Policy and the Act ultimately aim at providing electricity to the consumers at
affordable prices. Moreover, the while ensuring that investment is safeguarded in a
reasonable manner, the consumers are the ones who shall ultimately bear the loss in
form of payment of addition surcharge for compensating the high energy charges that
the Discoms bear.15
10CIT Bombay v. Mahindra and Mahindra Ltd. (1983) 4 SCC 392 at 39411 Moot Problem Page 2 Para 212Appeal no. 65 of 201313Uttar Haryana BijliVitran Nigam v. CERC 2016 Scc Online APTEL 94 14 Moot Problem Page 2 Para 115Consultation paper on Additional Surcharge, Available at https://powermin.nic.in/sites/default/files/webform/notices/Seeking_Comments_on_Consultation_paper_on_issues_pertaining_to_Open_Access.pdf
MEMORANDUM ON BEHALF OF THE APPELLANT
8 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
D. MULTI-YEAR TARIFF:
9. Government has frozen the tariff in violation to the requirement that when tariff is
determined by regulatory body, such tariff needs to be revised at regular interval.
Considering the sales forecast approved by the Appropriate Commission during Multi
Year period, the Appellant entered into long term Power Purchase Agreements (PPA)
with the Respondent so as to ensure supply of power for the envisaged increase in the
load. Whenever any consumer opts for open access and takes intermittent supply
through open access, the DISCOMs continue to pay fixed charges in lieu of its
contracted capacity with generation stations.
10. However, DISCOMs are unable to sufficiently recover such fixed cost obligation
from the open access consumers. The cost recovered from fixed charges in the tariff
schedule is generally less than the fixed cost incurred by the DISCOM for supplying
energy. This leads to the situation where the DISCOM is saddled with the stranded
cost on account of its universal supply obligation. In such cases, fixed charges for
such stranded assets should be borne by the customers as part of additional surcharge
E. REFLECTING THE COST OF SUPPLY:
11. CERC has fixed the tariff in such a manner that is detrimental to the Appellant
Company and therefore the entire burden of the high cost of supply of the Respondent
Company shall potentially form the debt burden of the Appellant Company.
IV. THAT PPA IS IN VIOLATION OF SECTION 60
i. It is most humbly submitted that Section 60 of EA 2003 relates to market domination
and it refers to prevention of adverse effect on competition in electricity industry. For
this, the provisions of Competition Act, 2002 have been submitted to be relevant.16
16 TPC Ltd. v. Reliance Infra Ltd. Case No. 13 of 2010
MEMORANDUM ON BEHALF OF THE APPELLANT
9 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
A. PPA IS ANTI-COMPETITIVE:
ii. It is humbly submitted that PPA entered into between the parties is anti-competitive,
in contravention to Section 3(4) read with Section 3(1) of the Competition Act, 2002
by creating barrier for new entrants in the market and foreclosing the market.
iii. With the existing PPA, the respondent is trying to foreclose the market for other
competitorsas other DISCOMs are not free to enter into PPA with power producers
at competitive prices.80% of the revenue of Appellant Company goes into
purchasing power from the Central entities leaving behind no other option for the
Appellant to procure electricity from other sources at competitive prices within the
relevant market.
iv. There is no doubt that to enter into generation sector in itself involves high capital
expenditure and catering maximum portion of the market demand, Respondent is
trying to put barriers to the entry for new power producers who are willing to supply
at lower rates, thus causing an adverse effect on the competition in the market.
B. THAT RESPONDENT COMPANY ABUSES DOMINANCE:
5. It is most humbly submitted before this Hon’ble Court that the respondent has been
and is trying to abuse its dominance through the long term PPA which hinders
competition and affects the independent power producers who are interested in
supplying electricity at lower rates and is thus, in violation of Section 4(2)(c) and
Section 4(2)(e) of the Competition Act, 2002. For the purposes of establishing
dominance, relevant market shall be the ‘supply of electricity by GENCOs’ and
geographical market is State of Delaware.
6. Section 19(4) lays down various factors to determine the dominant position of any
enterprise in the relevant market. Consequently, it might be said that market share,
though a major factor, is not the sole yardstick in determination of dominance. In
RamakantKini v. Hiranandani Hospital17, CCI clarified that the market shares of an
17RamakantKini v. HiranandaniHospital,Case No. 39 of 2012.
MEMORANDUM ON BEHALF OF THE APPELLANT
10 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
entity is 'only one of the factors that decides whether an enterprise is dominant or
not, but that factor alone cannot be decisive proof of dominance.
7. The market share of the licensee or generating company, size and importance of the
competitors, level of concentration in the market, supply capacity of the competitors
are a few factors that need to be considered in order to ascertain the dominant
position of the entity alleged.18
8. The Respondent Company has largest market share in generation of thermal
electricity with installed capacity significant enough to be the largest procurer of coal
from Coal India Limited. This demonstrates that extremely long term PPA grants
immense de facto market power to the Respondent Company.
9. By imposing unfair conditions and onerous clauses in the PPAs, including absence of
exit clause for the Appellant and 30 years long duration of the contract, the
Respondent Company has contravened the provisions of Section 4(2)(a)(i) of the Act.
Further, delay in commercial operation of plants and charging of higher rates by the
Respondent Company for supply of electricity in State of Delaware is also alleged to
be violative of Section 4 of the Competition Act.
V. THAT PPA IS VOID UNDER SECTION 23 OF THE CONTRACT ACT, 1872
i. It is most humbly submitted that Section 23 of the Indian Contract Act shows that
where a contractual provision is against a specific statutory provision or if a
contractual clause is allowed to be implemented the same will result in
frustration of a right conferred by law or if the contractual clause is immoral or
oppose to public policy, then, in such cases the contractual clause is invalid and
void.19
18 Explanatory Memorandum to the draft Central Electricity Regulatory Commission (Prevention of Adverse Effect on Competition) Regulations, 201219 North Delhi Municipal Corporation v. Prem Chand Gupta 2017 Scc Online Del 9154
MEMORANDUM ON BEHALF OF THE APPELLANT
11 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
ii. In India Financial Assn., Seventh Day Adventists v. M.A Unneerikutty20, the Apex
Court looked into the ambit of public policy while holding the agreement to be
void under Section 23 of the Contract Act, 1872.
“The primary duty of a Court of a law is to enforce a promise which the
parties have made and to uphold the sanctity of contract which form the
basis of society, but in certain cases, the Court may relieve them of their
duty on a rule founded on what is called the public policy; … but the
doctrine is extended not only to harmful cases but also to harmful
tendencies.
This doctrine of public policy is only a branch of common law, and just like
any other branch of common Law it is governed by precedents. The
principles have been crystallized under different heads and though it is
permissible for Courts to expound and apply them to different situations, it
should only be invoked in clear and incontestable cases of harm to the
public.”
iii. In the present case, greater public interest is put at stake so as to ensure that
the Respondent earns considerable amount of profits, the PPA in its present
form clearly displays unprofitable tendencies for the consumers. Consumer
while referred to in the Electricity Act includes both the Appellant Company
and domestic consumers.21
iv. Under Section 23, the object of an agreement becomes unlawful if it was of
such a nature that, if permitted, it would defeat the provisions of any law.22 As
contended above, the PPA is in contravention to provisions of Electricity Act,
against the objectives if National Electricity Policy, National Tariff Policy
20India Financial Assn., Seventh Day Adventists v. M.A Unneerikutty (2006) 6 SCC 35121Section 2(15), Electricity Act, 2003
"consumer" means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in the business of supplying electricity to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee, the Government or such other person, as the case may be;
22 North Delhi Municipal Corporation v. Prem Chand Gupta 2017 Scc Online Del 9154
MEMORANDUM ON BEHALF OF THE APPELLANT
12 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
and Competition Act. If PPA of such a nature in its current form is continued
shall defeat the legislative intent behind the welfare legislations. Therefore,
with operation of Section 23, PPA is hit by the provisions of Indian Contract
Act, 1872.
2. WHETHER NORTH ATLANTIC EDISON INC. IS CORRECT IN
APPROACHING THROUGH UK GOVERNMENT TO SEEK RELIEF
UNDER BILATERAL AGREEMENTS?
1. It is humbly submitted before this Honorable Court that the appellant seeks permission of
the court to initiate state-state arbitration between Government of UK and Government of
Indiana under Article 10 of Bilateral Investment Promotion & Protection Agreement 23(hereinafter referred as BIPA) entered on 14 march 1994 under structured rules modeled
on the United Nations Commission on International Trade Law (UNCITRAL) arbitration
rules.24
I. THAT THE HON’BLE COURT MAY CONSENT FOR ARBITRATION:
2. The National Courts of Indiana inherently lacked the jurisdiction to entertain any dispute
arising out of a Treaty between two sovereign countries. The Union of Indiana was a
party to BIPA, a Treaty between two sovereign governments and the obligations under
such treaties were not subject to domestic laws and disputes arising out of such treaties
were not subject to the jurisdiction of the National Courts. The Courts can not interpret
and/or enforce the provisions of Bilateral Investment Treaties as the law made such
issues non-justiciable.
23 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India for the Promotion and Protection of Investments 1994.24Bernasconi-Osterwalder, N. (2014), State-State Dispute Settlement Clause in Investment Treaties (IISD Best Practices Series). Geneva and Winnipeg: IISD. Retrieved from http://www.iisd.org/sites/default/files/publications/ best-practices-state-state-dispute-settlement-investment-treaties.pdf.
MEMORANDUM ON BEHALF OF THE APPELLANT
13 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
3. As held in The Campaign for Nuclear Disarmament v. The Prime Minister of the United
Kingdom25, &Tin Council Case [J.H. Rayner (Mincing Lane) Ltd. v. Department of Trade
& Industry &Ors.26, as under: -
" ......if there existed a rule of international law which implied in a treaty or imposed
on sovereign states which enter into a treaty, an obligation....to discharge the debts of
an international organization established by that treaty, the rule of international law
could only be enforced under international law. Treaty rights and obligations
conferred or imposed by agreement or by international law cannot be enforced by the
Courts of the United Kingdom...One has only to envisage a dispute, possibly between
the member states and the I.T.C. or possibly between the member states inter se, as to
the scope and consequence of the authority so agreed to be granted. This must
necessarily be a question of the effect of the treaty on the plane of international law
and a domestic court has not the competence so as to adjudicate upon the rights of
sovereign states.”
4. In SGS SociétéGénérale de Surveillance S.A. v. Islamic Republic of Pakistan27,
held: ...However, although the Supreme Court Judgment of July 3, 2002 is final as a
matter of the law of Pakistan, as a matter of international law, it does not in any way bind
this Tribunal...It is essential for the proper operation of both the BIT and the ICSID
Convention that the right of access to international adjudication be maintained. The right
to seek access to international adjudication must be respected and cannot be constrained
by an order of a national court. Nor can a State plead its internal law in defence of an act
that is inconsistent with its international obligations.
25The Campaign for Nuclear Disarmament v. The Prime Minister of the United Kingdom, [2002] EWHC 2777 (Admin)26Tin Council Case [J.H. Rayner (Mincing Lane) Ltd. v. Department of Trade & Industry &Ors ,[1990] 2 AC 418 (House of Lords).
27SGS SociétéGénérale de Surveillance S.A. v. Islamic Republic of Pakistan (ICSID Case No. ARB/01/13) Procedural Order No.2 dated 16 October 2002.
MEMORANDUM ON BEHALF OF THE APPELLANT
14 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
5. The Indiana National Courts neither have the jurisdiction over the subject matter of the
dispute (which is a dispute arising out of an alleged breach of a Treaty by the Union of
Indiana), nor did they have jurisdiction Ratione Personae (i.e. over the Defendants).
6. Under Articles 2628 and 2729 of the Vienna Convention on the Law of Treaties, the
obligations of a State, under a bilateral or multilateral international treaty, are owed by a
Sovereign State to one or more other Sovereign States. A breach of treaty obligations was
a violation of international law and the remedy for this wrong had to be found in
international law. The two principles which had been unanimously accepted are that a
State cannot plead provisions of its municipal law to escape international responsibility,
and legislative, judicial as well as executive acts are all capable of giving rise to State
responsibility.
7. Even when the obligations under a treaty overlapped with domestic law (for example the
procedure under the internal criminal law, or specific laws enacted as measures to give
effect to Treaty Obligations) and the domestic law involved the actions of National
Courts, the action of the Courts themselves could be considered as a violation of the
Treaty under Articles 330 and 431 of the Responsibility of States for Internationally
Wrongful Acts (ARSIWA).
8. Under Article 1032 of the BIPA laid out the procedure to be followed in the case of a
dispute between the Contracting Parties (in this case the United Kingdom) and (Union of
Indiana). The dispute resolution procedure was an element of the bilateral treaty, and thus
any conduct by a State whether by legislation, executive action or resort to a National
Court which interfered with this process would in itself be a violation of the Treaty.
28Article 26 of VCLT.29Article 27 of VCLT.
30Article 3 of ARSIWA.
31Article 4 of ARSIWA.32Article 10 of BIPA.
MEMORANDUM ON BEHALF OF THE APPELLANT
15 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
9. The BIPA specifically provided for the UNCITRAL Arbitration Rules 1976 to apply and
Article 2133 incorporated the principle of kompetenzkompetenz.
II. THE PARTIES TO THE ARBITRATION AND RELATED ENTITIES:
10. The Respondent is the Government of Indiana. That the Government has violated BIPA
both directly and through its instrumentalities and related slate enterprises and entities.
These instrumentalities and related state enterprises and entities qualifies for the term
“other authorities’34, and are therefore State under article 1235 of Constitution of Indiana:
Thermal Power Corporation (hereinafter TPC): TPC is a state run generation
entity and therefore is a state. It is a Public Sector undertaking of Central
Government under Government of Indiana.36
III. THE BASIS FOR THE ARBITRATION, THE APPLICABLE LAW AND
TREATY V. CONTRACT
A. THE BASIS FOR THE ARBITRATION:
11. Appellants’ hereby request arbitration of the dispute set forth herein pursuant to the state-
state dispute settlement provisions Article 10 of BIPA and in accordance with Articles
3(3)(a) and (3)(c) of the UNCITIRAL Arbitration Rules.
33Article 21 of UNCITRAL Arbitration Rules 1976.
34Article 12 of Constitution of India 1950.35Id.36AIR 1975 SC 1331
MEMORANDUM ON BEHALF OF THE APPELLANT
16 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
12. Pursuant to Article 10.1 of BIPA, states37 have agreed to resort to state-state arbitration
for matters “concerning the interpretation or application” of the treaty.38
“Interpretation” is the determination of the meaning of particular provisions of
an agreement in concrete or proposed situations. “Application” relates to the
extent to which the actions or measures taken or proposed by the contracting
parties comply with the terms of an agreement, its object and purpose 39 . These
two interact closely because application inevitably involves interpretation of
treaty provisions, and application could in turn feed into interpretation. The
scope set by these two phrases is “all-encompassing” 40 , capable of covering all
disputes arising from the treaty at issue, such as disputes regarding the
interpretation of a treaty provision in an abstract manner or for a specific case,
whether an act amounts to a treaty violation either based on direct claims or
indirect, diplomatic protection claims...41
13. Pursuant to Article 10(1) of BIPA, it applies to measures adopted or maintained by a
Party relating to certain "investors" and "investments" of another Party (the United
Kingdom), as defined in Article 1(b) and Article 1(c) of BIPA. Appellants are clearly
"investors" of the United Kingdom as defined in Article 1(c)4243 with an "investment" as
defined by that same Article 1(b)44.
14. Herein, the definition is an asset based definition45. North Atlantic Edison Inc. (NAEI), is
an UK based energy company which has acquired Delaware Electricity Board NAEI is a
37 The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of India 38Article 10 of BIPA.39 UNCTAD, 2003, p. 14.40Id.41Supra note no 23.42 Article 1(c) of BIPA.43 Two fundamental considerations arise with respect to the definition of ‘Investor’: (a) types of persons who may be considered as investors; and (b) availability of a link to connect the investor with the contracting party to the BIT.44 Article 1(b) of BIPA describes “investment”.
45BerkDemirkol, the Notion of ‘Investment’ in International Investment Law (February 1, 2015). (2015) I Turkish Commercial Law Review 41
MEMORANDUM ON BEHALF OF THE APPELLANT
17 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
“company”46 incorporated or constituted under the laws of the United Kingdom. In
addition, DEB constitutes a legal entity incorporated in the territory of Indiana in
accordance with its legislation and is indirectly owned and controlled by Appellants.
15. Appellants fulfill the requirements, among others, of Article 1(b) and the definition of
"investment" under subparts (i), (ii) and (iii), of that same Article. More specifically:
i. Appellants directly own and control North Atlantic Edison Inc.
ii. Appellants directly own and control 51% of the "stock and other forms of
equity participation" in North Atlantic Edison Inc., a legal entity
incorporated in Indiana in conformity with its legislation.
iii. Appellant can make rightful claims to money or to any performance under
contract having a financial value; and
iv. Appellant' controlling interest in the Power Purchase Agreement by virtue
of their controlling interest in NAEI also clearly qualifies as Appellants'
"investment" under BIPA under Article 1(c);
16. Appellants' directly own and control assets that possess the characteristics of an
investment, including, but not limited to, (l) the commitment of capital or other resources,
(2) the expectation of gain or profit, and (3) the assumption of risk (4) duration of
investment or assumption of risk. These characteristics, in addition to contribution of
investment to economic development of the Host State, are together widely referred to as
the Salini47 criteria. Although this test was used to interpret the definition of Investment
under the ICSID Convention, it has been frequently used by arbitral tribunals beyond the
auspices of the ICSID Convention.48
B. THE APPLICABLE LAW:
17. Under Article 11(1) of BIPA, investment is governed by laws of Indiana.
18. Pursuant to Article 12 of BIPA and Article 3349 of the UNCITRAL Arbitration Rules, the
law governing this dispute consists of the provisions of BIPA, the principles of
46ARTICLE 1(a) (i) of BIPA.47Salini v. Morocco.48Romak S.A. (Switzerland) v.The Republic of Uzbekistan (UNCITRAL, PCA Case No. AA280), Award, 26 November 2009, para. 207.49Article 33 of the UNCITRAL Arbitration Rules.
MEMORANDUM ON BEHALF OF THE APPELLANT
18 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
international law agreed upon and designated by the Contracting Parties to BIPA, as well
as other applicable principles of international law.
C. TREATY VERSUS CONTRACT CLAIMS:
19. An investment is governed both by a treaty and the contract in particular. In the event of a
dispute, it is logical that both claims can arise out of the same factual matrix. In such
cases, Tribunals have encountered difficulty in distinguishing breaches of treaty from
breaches of contract. Nevertheless, they have emphasized upon the importance of
drawing a line between the two.
20. In Compania De Aguas Del Aconquija S.A and Vivendi Universal versus Argentine
Republic50 the Adhoc Committee held that, “where the fundamental basis of the claim is
a treaty laying down an independent standard by which the conduct of the parties has to
be judged, the existence of an exclusive jurisdiction clause in a contract between the
claimant and the state or its subdivisions cannot operate as a bar to the application of the
treaty standard.” Referring to importance of assessing contractual issues, the Ad hoc
committee held that the terms of the contract in municipal law were relevant to assess
whether there has been a treaty breach. It distinguished between exercising contractual
jurisdiction (in this case, in the Tucuman courts) and between “taking into account the
terms of a contract” to determine whether it results in breach of an independent treaty
standard. Thus, the Vivendi Ad hoc Committee found that the fundamental basis of the
Claim lay in the BIT.
IV. APPELLANTS' CLAIMS AGAINST THE GOVERNMENT
A. THAT THE GOVERNMENT HAS FAILED ON ITS COMMITMENT TO PROTECT FOREIGN
INVESTMENT
Under BIPA:
50ICSID Case No. ARB/97/3
MEMORANDUM ON BEHALF OF THE APPELLANT
19 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
21. BIPA is bilateral agreement designed to encourage and protect foreign investment and to
promote the rule of law. In the preamble to BIPA, the contracting parties, including the
Government of the United Kingdom of Great Britain and Northern Ireland -and the
Government of the Republic of India, expressly resolved tocreate conditions favourable
for fostering greater investment by investors of one State in the territory of the Other
State under Preamble of BIPA. Further, Recognizing that the encouragement and
reciprocal protection under international agreement of such investment will be conducive
to the stimulation of individual business initiative and will increase prosperity in both
States;51
a) Moreover, the objectives of the Treaty, as elaborated more specifically through its
principles and rules, including national treatment, most favored-nation treatment,
and transparency, are to: substantially increase investment opportunities in the
territories of the Parties;
b) Under article 3(1) the parties have agreed to encourage and create favourable
conditions for investors of the other Contracting Party to make investments in its
territory.
c) The Parties shall interpret and apply the provisions of the Treaty in light of its
objectives and in accordance with applicable rules of international law under
Article 12 of BIPA.
d) The violations of BIPA must be viewed in light of these clearly-stated objectives
of the Contracting Parties read with ‘good faith principle under Article 31 (1) of
the VCLT52.
e) The wrongful actions of the Government described herein were intentional,
willful, evinced a reckless indifference to the rights of Appellant, and violated the
principles and the specific provisions of BIPA.
B. THAT THE GOVERNMENT’S ACTIONS CONSTITUTE A VIOLATION OF THE FAIR AND
EQUITABLE TREATMENT OBLIGATION IN ARTICLE 3(2) OF BIPA:
51Preamble of India-UK BIT, 199452Article 31, VCLT.
MEMORANDUM ON BEHALF OF THE APPELLANT
20 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
22. The Government’s ongoing actions constitute a violation of the "fair and equitable"
treatment obligation in clear contravention of Article 3(2) of BIPA.53
23. Under this doctrine there are two principles:
i. "Minimum Standards of Treatment": The US-Mexico Claims Tribunals
recognized existence of such standard in its decisions.54 A part of the decision in
Neer v. Mexico is often cited as laying down the minimum standard. In this case,
the Commission held that for the treatment “to constitute an international
delinquency, it should amount to an outrage, bad faith, willful neglect of duty, or
an insufficiency of governmental action so far short of international standards that
every reasonable and impartial man would readily recognize its insufficiency.”55
ii. The basic premise of Minimum Standard of Treatment is that an alien is protected
against excessive and unacceptable measures of the host State by established rules
and standards of customary international law which are independent of the laws of
the host State.56
iii. The doctrine of legitimate expectations holds that public authorities should be
bound by the representations made to parties, and must therefore protect the
reasonable expectations they create in the public towards government activities.
Subsequent retraction on the representation and decisions inconsistent with such
expectations trigger state liability.
iv. The concept of legitimate expectations comes into play in two different ways in
international investment law:
i. The first category is state conduct in the form of specific
representations or declarations made by state authorities relating to the
investment, relied upon by investor to make or expand an investment and
53Article 3(2) of BIPA.
54Neer(1926)IV RIAA 60;Faulkner (1927)21 AJIL 349;Harry Roberts(1927)21 AJIL 357;Hopkins(1927)21 AJIL 160; Way (1929)23 AJIL 466;cited in Ibid.,1455Neer(1926)IV RIAA 60,p6156 SCHILL STEPHEN, THE MULTILATERALIZATION OF INTERNATIONAL INVESTMENT LAW.
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21 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
later retracted by the State. In this sense, legitimate expectations operates on
lines of
ii. The second category deals with the state’s existing legal
framework in the form of legislations, rules, regulations, contractual
undertakings, and executive grants such as licenses.
v. Arbitral decisions that have admittedly interpreted legitimate expectations largely
in favour of the foreign investor.57
vi. The other key exclusion is the ground of ‘arbitrariness’ to challenge regulatory
measures of the host State. Protection against arbitrariness of a regulatory
measure has been recognized in the narrower customary international law
standard58 as well as the autonomous FET standard,59 indicating the importance of
this standard of protection even after taking into account the regulatory
obligations of the State.
vii. The Occidental tribunal explicitly renounced the need of a competitive
relationship in the same business sector to establish like circumstance.60
viii. In Alpha Projektholding v. Ukraine the tribunal stated that discrimination could
arise de jure or de facto.61
ix. In particular, the Government’s action to freeze tariff, its inability to fulfill its
promises it had promised to encourage foreign investment, its inefficiency to
regulate on high power purchasing cost, bill collection inefficiencies, its changes
to the regulatory regime without Claimants' consent, by failing to enforce its laws
that require NAEI’s customers to pay for the electricity they consume, by failing
to implement new laws designed to reduce theft of electricity, all constitute
violations of the fair and equitable treatment required under international law.
57CMS v. Argentina; National Grid v. Argentina, UNCITRAL, Award ¶ 176-179 (Nov. 3, 2008) [hereinafter CMS Award].58 International Thunderbird Gaming Corporation v. United Mexican States, UNCITRAL, Arbitral Award (Jan. 26, 2006).59Lauder v. Czech Republic, UNCITRAL, Award, 3 September 2001, ¶ 221; Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, Award, 27 August 2008, ¶ 18460Occidental Exploration and Production Company v. Equador, LCIA Case No UN 3467, Final Award on 1st July 2004.61Alpha Projektholding v. Ukraine, ICSID Case No. ARB/07/16, Award, 8 November 2010.
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C. THAT THE GOVERNMENT’S ACTIONS CONSTITUTE A VIOLATION OF NATIONAL
TREATMENT UNDER ARTICLE 4(1) OF BIPA:
24. Under Article 4(1) of BIPA,”62A National Treatment obligation arises out of a treaty
obligation. As observed in the Methanex case:
“As to the question of whether a rule of customary international law prohibits a
State, in the absence of a treaty obligation, from differentiating in its treatment of
nationals and aliens, international law is clear. In the absence of a contrary rule
of international law binding on the States parties, whether of conventional or
customary origin, a State may differentiate in its treatment of nationals and
aliens.”63
25. Therefore, any discernible national treatment rule in international law cannot override a
specifically drafted national treatment clause in a BIT. Such clauses, usually state that the
foreign investor will be accorded treatment no less favourable than that which the host
State accords to its own investors.
26. In Al Tamimi v. The State of Oman64, the Tribunal determined that the treatment accorded
to foreign investment and a State’s control over the investment made by its own investors
ought to be “materially different”, in order to attract a violation of the national treatment
protection.
27. The Government’s freezing of tariffs for period has resulted in accumulations of
regulatory assets. Moreover, the government is not allowing the Appellants to scrap Long
term PPAs and enter into short term PPAs in order to save its state entity TPC. There is
discrimination between a foreign entity and a state owned entity. The distributors of other
states have liberty to enter into Short term PPAs with Generators and sell electricity to
consumers at lower costs while Appellant is not allowed to do so. Due to this
discrimination the foreign entity is suffering huge losses.
62Article 4 of India-UK BIT 1994.63Methanex Corporation v. United States (Final Award of the Tribunal on Jurisdiction and Merits, 3 Aug. 2005) [Methanex] at Part IV – Chapter C, para. 2564ICSID Case No. ARB/11/33
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23 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
D. THAT THE GOVERNMENT’S ACTIONS CONSTITUTE A VIOLATION OF UMBRELLA
CLAUSE UNDER ARTICLE 3(3) OF BIPA:
28. Under Article 3(3)65 of BIPA: Breach by a State to observe its obligations under contract
can amount to a treaty breach by virtue of the aforementioned “observance of obligations
clause” in the BIT. As these clauses transform contract claims into treaty claims, they are
known as umbrella clauses.
29. These clauses serve as a mechanism to enforce obligations undertaken by the Host State
and are often construed as catch- all provisions that arguably enable investors to bring a
pure investment contract claim under the breach of a BIT.66
30. In his Hague lecture, Prosper Weil presented the idea that an investment treaty would
transform a mere contractual obligation between state and investor into an international
law obligation, in particular if the treaty included a clause obliging the state to respect
such contract.67
31. At the same time as the SGS brought the claim against Pakistan, it brought another case
against the Philippines.68. The Tribunal examined the interpretation of the clause in the
SGS v. Pakistan decision and although it recognized that the language of the clause was
not the same, it found the decision unconvincing69 and highly restrictive.70 However,
while the Tribunal took a wider reading of the scope of the umbrella clause, than the SGS
v. Pakistan Tribunal, it required at the end that if the contract vests exclusive jurisdiction
over disputes arising under its terms to another tribunal (domestic court or a contractual
arbitral tribunal) then this tribunal has the primary jurisdiction.
65Article 3(3) of BIPA.
66Schill, Stephen W., “Enabling Private Ordering: Function, Scope and Effect of Umbrella Clauses in International Investment Treaties.” 18 Minn. J. Int’l L.1 (2009), p. 35.67Recueil des Cours III 1969 pp. 132 et seq.68 SGS SociétéGénérale de Surveillance, S.A. v. the Republic of the Philippines, ICSID case No. ARB/02/6, Decision on Jurisdiction, 29 January 2004 available at www.worldbank.org/icsid/cases/SGSvPhil-final.pdf.69Ibid. at para. 125.70Ibid. at para.119 and 120.
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24 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
32. The Tribunal in Sempra Energy International v. Argentina71 recognized that these
contractual claims were also treaty claims and was reinforced in its view by the fact that
“the Treaty also includes the specific guarantee of a general ‘umbrella clause’, [such as
that of Article II(2)(c)], involving the obligation to observe contractual commitments
concerning the investment, creates an even closer link between the contract, the context
of the investment and the Treaty”.72
33. The Partial Award in Eureko B. V. v. Poland73, Noble Ventures, Inc v. Romania74was the
question of whether contractual obligations also amounted to international obligations by
virtue of the “umbrella clause” in the US-Romania BIT. The tribunal held that the BIT
intended to create obligations and “obviously obligations beyond those specified in other
provisions of the BIT itself” and by doing so it referred clearly to investment contracts. It
also noted that such an interpretation was also supported by the object and the purpose
rule “a clause that is readily capable of being interpreted in this way and which would
otherwise be deprived of practical applicability is naturally to be understood as protecting
investors also with regard to contracts with the host State generally in so far as the
contract was entered into with regard to an investment”.
34. Herein, the foreign entity is unable to fulfill its obligations under contract due to hurdles
put by government regulations and therefore the government is in violation of “umbrella
clause”.
E. THE GOVERNMENT’S ACTIONS CONSTITUTE AN EXPROPRIATION IN VIOLATION OF
ARTICLE 5 OF BIPA:
Appellants allege indirect expropriation under Article 575 of BIPA.
35. The UNCTAD study on ‘Taking of Property’ has described the term creeping
expropriation:
71 Sempra Energy International v. Republic of Argentina, ICSID case No ARB/02/16, Decision on Objections to Jurisdiction, 11 May 2005.72Idem, para. 101.73Eureko B.V. v. Poland, Partial Award, and 19 August 2005.74 Noble Ventures, Inc. v. Romania, Award October 12, 2005 ICSID Case No ARB/ 01/11.75Article 5 of BIPA.
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25 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
This may be defined as the slow and incremental encroachment on one or more of the
ownership rights of a foreign investor that diminishes the value of its investment. The
legal title of the property remains vested in the foreign investor but the investor’s rights
of use of the property are diminished as a result of the interference by the state.76
36. One of the most exhaustive definitions of indirect expropriation was laid out by the
tribunal in Metalclad v. Mexico:
“Expropriation includes not only open, deliberate and acknowledged takings of
property such as outright seizure, formal or obligatory transfer of title in favour of the
Host State, but also covert or incidental interference with the use of property which has
the effect of depriving the owners, in whole or in significant part of the use or
reasonably-to-be-expected economic benefit of property even if necessarily to the
obvious benefit of the Host State.”77
37. Indirect expropriation involves total or near-total deprivation of an investment but
without a formal transfer of title or outright seizure.78 A classic definition for the same
was given by the Starrett Housing79and in Perenco80.
38. A necessary condition for indirect expropriation is “the neutralisation of the use of the
investment”.81 In order to qualify as indirect expropriation, the measure must constitute a
deprivation of the economic use and enjoyment, as if the rights related thereto, such as
the income or benefits, had ceased to exist.”
76UNCTAD (n.41) 11, 12.77ICSID Case no. ARB/(AF)/ 97/178Burlington Resources Inc. v. Republic of Ecuador (ICSID Case No. ARB/08/5), Decision on Liability, 14 December 2012, para. 396.79Starrett Housing v. Iran, Interlocutory Award No. ITL 32-24-1, 19 December 1983, 4 Iran-United States Claims Tribunal Reports 122, p. 15480Perenco Ecuador Ltd. v. The Republic of Ecuador and EmpresaEstatalPetróleosdel Ecuador (Petroecuador) (ICSID Case No. ARB/08/6)81 El Paso v. Argentina, CMS v. Argentina
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26 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
39. Creeping expropriation is a form of indirect expropriation and is defined as the
incremental encroachment on one or more of the ownership rights of a foreign investor
that eventually destroys (or nearly destroys) the value of investment, or deprives him or
her of control over the investment. A series of separate State acts, usually taken within a
limited time span, are then regarded as constituent parts of the unified treatment of the
investor or investment.82
40. By requiring Appellant to distribute electricity below its actual costs, particularly after
disadvantaging appellant by freezing tariffs for period is resulting in accumulations of
regulatory assets. Power purchase cost has increased threefold and every unit of power
supplied add to distributor’s debt burden because the regulated power tariff charged to
the consumer does not reflect the actual cost of power purchase. Cash flow problem is
affecting distribution Company’s ability to buy power and to invest in infrastructure
maintenance leading to supply disruptions.
41. The Government is engaging in a "creeping expropriation" of NAEI through this
accumulated debt, which is usurping the investment and depriving Appellants of the
value of their investment. Through the actions described above, the Government has
violated Article 5 of BIPA and the Government is continuing to destroy the value of
NAEI of cash flows and revenues. Cash flow problem is affecting distribution
Company’s ability to buy power and to invest in infrastructure maintenance leading to
supply disruptions.
3. WHETHER STATE GOVERNMENT HAS ANY OTHER OPTION TO
DEAL WITH THE SITUATION RATHER THAN CANCELLING THE
LONG TERM AGREEMENT?
1. The Appellant most humbly submits that the PPA entered into by the previous
government obligate the appellant to pay a higher purchasing cost than the market price
82 Expropriation, UNCTAD Series on Issues in International Investment Agreements II- A Sequel (2012) p. 11
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27 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
thereby leading to increasing regulatory assets. Thereby the most viable option is to
cancel the same and enter into cost efficient short duration PPAs.
2. However, the state government could also work towards the prima facie requirement of
making an integrated strategy for appropriate pricing of electricity which is being sold by
generating stations which can be achieved through Revision of Tariff in accordance with
Section 61, it may also order pooling of the current source along with a cheaper source to
make the power purchasing cost affordable in the larger public interest.
3. The government may also work towards achieving technological development of
distribution infrastructure as the current infrastructure is providing huge losses due to
theft etc., the government may also the government may order Renovation,
Modernization or Decommissioning of costly generating plants and replacing them with
more efficient and cost effective plants or doing an Auction of such plants through a PPA
which shall in a long run reduce the cost incurred by such generating units when
compared with the present costs thereby reducing the price to be paid by the Appellants.
I. REVISION OF TARIFF IN ACCORDANCE WITH SECTION 61
4. It is hereby submitted that Section 61 provides for setting Terms and Conditions for
determination of tariff, and provides to be guided by the factor that the tariff
progressively reflects the cost of supply of electricity,83 and safeguards the consumer’s
interest along with recovery of the cost of electricity at a reasonable manner.84
5. In the present case the rate of increase between the power purchasing cost and the
consumer tariff is 10:3 which has led to a further increase in the debt than could have
been anticipated.
83 Section 61(g), The Electricity Act 200384 Section 61(d), The Electricity Act 2003
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28 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
6. The State Government should thereby work towards bridging the gap by:
a) Revising the Tariff in the PPA in a manner as prescribed by the Electricity Act;85
b) Instead of freezing the tariffs provide for a tariff regime in accordance with the multi-
year principles;86
c) Making the Retail Tariff reflect the actual costs incurred;87
d) Introducing the concept of Peak Hour Tariffs through time-of-the-day metering and
differential tariffs;88
e) Setting up a separate committee to finalize a compensatory tariff to be made
applicable until the hardship is lessened or removed;89
II. POOLING THE CURRENT SOURCE OF FUEL WITH A CHEAPER FUEL TO
MAKE POWER PURCHASING COST AFFORDABLE IN LARGER PUBLIC
INTEREST
7. It is most humbly submitted that for the purpose of ensuring that the power is generated
at a reasonable rate the state government may pass a policy ordering the introduction of
pooling the power generated within the PPA along with power generated at a cheaper
rate, this shall lead to the power purchasing cost being maintained at an affordable rate.
8. The state government is required to intervene as the appellant is facing huge losses due to
such increasing rate of power purchasing cost, such an intervention has been upheld by
the Supreme Court in the case of Essar Steel Limited v. Union of India and ors,.90whereby
a policy providing for guidelines to pool gas to provide a uniform delivered price was
85 Gujarat Urja Vikas Nigam Ltd. v. Solar Semiconductor Power company India Pvt. Ltd. and ors., Supreme Court, Civil Appeal No. 6399 of 201686 Section 61 (f), The Electricity Act 200387 Delhi Electricity Regulatory Commission, Approach Paper on Tariff Rationalization, February 2018, http://www.derc.gov.in/Public%20Notice/Tariff%20Rationalization/Approach%20Paper%20on%20Tariff%20Rationalisation.pdf88 Amulya K.N. Reddy and Gladys D. Sumithra, Karnataka’s Power Sector: Some Revelations, Economic and Political Weekly, Vol. 32, No. 12 (Mar. 22-28, 1997), pp. 585-60089 Adani Power Limited vs. Uttar Haryana Bijli Vidyut Nigam Limited and ors;Coastal Gujarat Power Limited vs Gujarat Urja Vikas Nigam Limited and Ors.90 Essar Steel Limited v. Union of India and ors., Civil appeal no. 4609 of 2009 as decided on 19th April 2016
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29 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
held to be valid,91 thereby providing a uniform average pooled price within long term
contracts.
9. The same can be made applicable under the present case for the purpose of providing an
affordable cost for purchasing power from the respondent, i.e. the generating company.
III. TECHNOLOGICAL DEVELOPMENT OF DISTRIBUTION INFRASTRUCTURE
10. It is hereby submitted before the honorable court that along with the high power
purchasing cost a major factor for increase in aggregate technical and commercial losses
has been Power Thefts and Bill Collection inefficiencies and lack of monitoring
infrastructure.
11. The State Government should thereby work towards developing and timely implementing
technologies which may lead to reducing the losses faced by the appellants. The same can
be achieved by-
a. Providing SCADA,92 Wireless SCADA93 or MATLAB,94 systems for
distribution utilities- These technologies in the power sector provide for efficient
controlling and monitoring and are highly beneficial for large scale industries
with a requirement of a high monitory health.95 These softwares can be used for
the purpose of gathering data from devices, aggregating and organizing the data
91 Policy decision dated 06.03.200792 Santosh B Belekar et. al., PLC and SCADA based distribution and control, Multidisciplinary Journal of Research in Engineering and Technology Volume 1, Issue 1 (April 2014) Pg. 105-110;
SCADA is The Supervisory Control And Data Acquisition is an industrial control system which organizes multiple technologies thereby allowing the processing, gathering and monitoring data together at the same time and then sending the information regarding the information collected to the control system where the same shall be analyzed as the real time data thereby leading to efficiently acknowledging the faults and quick solutions being provided. Refer Annexure I ‘SCADA in Distribution’ for a detailed map;
93 WIRELESS SCADA is the application of SCADA through wireless technologies like Radio Microwave or Satellite; Refer Annexure II ‘A practical SCADA Structure’; 94 MATLAB is a further updated version of SCADA95 Poonam Shivaji et al., Wireless SCADA: Review Paper, International Journal for Scientific Research and Development, Volume 5 Issue 11 Pg. 751-753
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30 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
from local or geographically disperse assets and systems into a consolidated and
well organized solution.96
A consolidated version of the plan being proposed has been perused as being marked
Annexure I and Annexure II.
b. Providing provision for a High voltage transmission and distribution system-
Keeping in view the techno-economic considerations a high voltage power flows
is required for long distances transmission with minimum possible losses. It shall
prove being an effective method for reducing technical losses, preventing theft of
power, improving the voltage of power being supplied and providing a better
service to the consumers.97
IV. RENOVATION, MODERNIZATION, AUCTION OR DECOMMISSIONING OF
PLANTS PERFORMING BELOW THE ACCEPTABLE STANDARDS OR
COSTLY GENERATING PLANTS
12. It is hereby submitted that the Power purchasing Cost within the agreement is triple the
cost available in the market. Thereby, the State Government may order renovating,
modernizing or decommissioning generating plants which are less cost effective and
highly uneconomical.98
13. Replacing such plants by generating stations located near the fuel sources such as pithead
locations or load centers working in accordance with upgraded acceptable standards shall
in turn help in meeting the objective of cost-benefit analysis.99 The factors which play the
major role in determining and justifying the decommissioning and demolition are
96 Tarun Agarwal, Scada Applications in Power Sector, Edgefx Technologies Pvt. Ltd. Available at https://www.edgefx.in/scada-applications-in-power-system/97 Ankita Gupta et. al., Effectiveness of High Voltage in Distribution System: High Voltage Distribution System, IOSR Journal of Electrical and Electronics Engineering, Volume 1, Issue 5 (July-Aug. 2012), PP 34-38 (www.iosrjournals.org)98 Indronil Roychowdhury, 27 ‘sick’ thermal power plants to be scrapped, Financial Express, November 13 2014; See Also E-REP Market Research Report, Decommissioning Thermal Power Plants in India- Evaluating New Industry Segment & Estimating USD 5 Billion Dollar Opportunity, June 2017 99 Government of India, Ministry of Power, National Electricity Policy (12th February 2005)
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31 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
Economic, environmental and corporate social responsibility concerns. 100 The right to
electricity at an affordable rate is an integral achievement of socio-economic rights.101
14. This is often termed as the Universal Service Obligation (USO), and to attain this
objective a portion of cheaper sourced power plants should be encouraged as is being
followed in Singapore.102
15. In the United Kingdom under the New Electricity Trading Arrangement Project of 2001
various old plants were closed or collapsed as they delivered a market price which was
too high and newer plants were established with a better efficiency.103
A. Auction of a generating plant through a PPA
16. The state government may order for an auction of the plants performing below the
acceptable level by a process of bidding, it shall provide such plants better maintenance
and operations along with handling the costs incurred for the same in a more efficient
manner, thereby bringing such plants at par with the latest plants which shall further lead
to reducing the purchasing costs charged from the DISCOMS.104
ANNEXURE I - SCADA in Distribution105
100 Edward Malley and David Zarider, Decommissioning Obsolete Power Plants Why Do it Now?; See Also U.S. Energy Information Administration/Electric Power Annual 2009, North American Electric Reliability Corporation 2010 Special Reliability Scenario Assessment: Resource Adequacy Impacts of Potential U.S. Environmental Regulations, October 2010, Credit Suisse, Growth from Subtraction, Impact of EPA Rules on Power Markets, 23 September 2010101Raja Mohan @ Mohan vs The Divisional Engineer on 9 March, 2016102 Delhi Electricity Regulatory Commission, Approach Paper on Tariff Rationalization, February 2018, http://www.derc.gov.in/Public%20Notice/Tariff%20Rationalization/Approach%20Paper%20on%20Tariff%20Rationalisation.pdf103 Luiz T.A. Maurer and Luiz A. Barroso,Electricity Auctions:An overview of efficient practices, A World Bank Study104 Sarita Singh, PPA Auction for stressed power stations gets bids for 2200 MW, The Economic Times (Jun 27, 2018)105Id at 9
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32 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
ANNEXURE II- A practical SCADA structure106
106Id
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33 TILA INTERNATIONAL MOOT COURT COMPETITION ON ENERGY 2018
PRAYER
Wherefore in the light of the Questions presented, pleadings submitted and Authorities
Cited, the Hon’ble Supreme Court may be pleased to:
1. Terminate the Long term Power Purchase Agreement for the reasons pleaded herewith
2. Declare that North Atlantic Inc is correct in approaching UK Government to seek relief under
the India-UK Bilateral Investment Promotion and Protection Treaty
3. Direct Concerned Government to exercise any other option that this Hon’ble Court may deem
fit in the best commercial interests of the Appellants
AND/OR
Pass any other order, direction or relief that it deems fit in the interest of Justice, Equity and
Good Conscience.
For this act of kindness, the Appellants shall duty bound forever pray.
Sd/-
(Counsel for the Appellants)
MEMORANDUM ON BEHALF OF THE APPELLANT