Tamil Nadu Electricity Board v ST-CMS Electric Company Private Ltd
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE COOKE,Mr Justice Cooke |
| Judgment Date | 16 July 2007 |
| Neutral Citation | [2007] EWHC 1713 (Comm) |
| Docket Number | Case No: 2006 Folio 1360 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 July 2007 |
[2007] EWHC 1713 (Comm)
The Honourable Mr Justice Cooke
Case No: 2006 Folio 1360
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Steven Gee QC, Prof Mark Watson-Gandy and Roger Kennell (instructed by Zaiwalla & Co) for the Claimant
Mr Joe Smouha QC and Mr Ricky Diwan (instructed by Freshfields) for the Defendant
Hearing dates: July 3,4,5,6,16 2007
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Cooke:
Introduction
The claimant (TNEB) is the State Electricity Board for the State of Tamil Nadu. Its principal objective is to generate, transmit and distribute electrical power. The defendant (ST-CMS) is an Indian incorporated company incorporated by foreign investors from the US, Switzerland and the Netherlands in 1993, for the purpose of pursuing the development, construction and operation of a 250 MW Lignite-Fired Power Plant located at Neyveli in the State of Tamil Nadu (the Plant). At the time of ST-CMS's incorporation, the regulatory regime then in force did not permit foreign companies to construct or own power plants. This necessitated the incorporation of an Indian company by the foreign investors. TNEB and ST-CMS first concluded a long term supply agreement for the supply of energy and capacity from the Plant on 4 November 1993. This subsequently took the form of the Restated and Amended Power Purchase Agreement dated 20 November 1996 (which was also subsequently amended) (the PPA).
The PPA includes Article 15 which provides for informal dispute resolution of “any dispute arising under this Agreement”. Failing resolution of any such dispute then, except as otherwise provided in the PPA, disputes arising out of or relating to the PPA are to be finally settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the ICC). The arbitration is to be held in London, England and the arbitration proceedings are to be conducted, and the award rendered, in the English language. Article 15.1(c) specifically provides that any arbitration proceedings or award rendered under the PPA and the validity, effect and interpretation of the Arbitration Agreement is to be governed by the laws of England and by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 10 June 1958, to which the United Kingdom and India were and are both parties.
ST-CMS has commenced arbitration by a Request for Arbitration under Article 4 of the ICC Rules. TNEB applies to this court under section 72 of the Arbitration Act 1996, seeking declarations that the matters submitted to arbitration are not within the scope of any arbitration agreement made between ST-CMS and TNEB and that neither the ICC Court of Arbitration, nor any arbitral tribunal appointed or approved by it, nor any other arbitral tribunal, has jurisdiction to determine matters submitted by ST-CMS. Injunctions are sought restraining ST-CMS from pursuing or continuing any steps in the ICC arbitration or from pursuing any other arbitration proceedings in relation to the self-same matters. ST-CMS seeks declarations to the opposite effect from those sought by TNEB and, waiting in the wings, is an anti-suit injunction, currently unnecessary because of undertakings given by TNEB, to prevent TNEB from pursuing the dispute between the parties, other than in the ICC arbitration already commenced.
The PPA
The PPA provides that TNEB will pay charges to ST-CMS for capacity and energy delivered to it under the terms of the agreement, in accordance with “the Tariff”, which means the rate set forth in schedule 3. The PPA provides for a 30 year term from the Commercial Operation Date, being the date upon which the project completed its Acceptance Test and was available to commence operations on a continuous, full time, commercial basis. This occurred on 15 December 2002. Paragraph 1 of schedule 3 then sets out the Tariff, which refers to CEA, which is defined in the PPA as “the Central Electricity Authority constituted under the Electricity Supply Act of 1948 and any successor agency”. Paragraph 1 of schedule 3, so far as relevant reads as follows:—
“1. Tariff
(a) TNEB shall pay the Monthly Tariff Payment for all Capacity and Energy for each Month or part thereof during the Term. A sample calculation of the Monthly Tariff Payment is attached as Annex A to this Schedule 3. The actual calculation of the Monthly Tariff Payment will be governed entirely and exclusively by this Agreement with the sample calculation acting solely as a guide.
…..
(d) The Parties hereby expressly agree that, notwithstanding anything contained in this Agreement or any other agreement, if any element of the Tariff provided for in this Agreement shall be in deviation of, inconsistent with or repugnant to the provisions contained in the Indian Electricity (Supply) Act, 1948 and, in particular, Notification No. S.O. 251(E) dated 31/03/92, as amended by Notification No. S.O. 35(E) of 18/19 January 1994, S.O. 605(E) dated 22 August 1994, S.O.39(E) dated 13 January 1995, S.O. dated 6 November 1995, and Resolution A-27/94-IPC dated 6 November 1995, copies of which are annexed as schedule 12, such element shall be deemed to be amended to the extent required to bring it into compliance with the relevant provisions of the aforesaid Notifications and any amounts paid by TNEB in excess of the Tariff as so amended shall be repaid by the Company provided, however, that in no Month shall the amount required to be refunded pursuant to this Section 1(d) reduce the Tariff payable to the company hereunder below the amount of the Fixed Charge…..”
Paragraph 1(b) of the Schedule refers to the Capital Cost, as further defined in paragraph 9, paragraph 2 sets out the Fixed Capacity Charge, paragraph 3 the Variable Fuel Charge, paragraph 4 the Incentive Performance Payment, paragraph 5 the Monthly Adjustment, and paragraph 7 the Year End Correction. These elements form part of the parameters for the calculation of the Tariff. Paragraph 9 contains definitions of words and phrases used in the Schedule. Amongst those definitions “Base Exchange Rate” is defined, in relation to foreign currency loans and interest, and all applicable fees thereon, or foreign currency paid up capital, to mean “the average exchange rate weighted over the contribution amounts of each foreign currency loan or foreign currency paid up capital source, as listed in the Approved Capital schedule” with a model computation thereafter set out by reference to the actual exchange rate on the particular day of the borrowings or equity contribution.
“Capital Cost” is defined in paragraph 9 in the following way:—
““Capital Cost” means, subject to Section 2.1 and Section 6.1(o) of the Agreement, the cost (expressed in Rupees) actually incurred by the Company in completing the Project, provided that costs in excess of the capital cost ceiling agreed upon by the Company and TNEB (Rs. 1200 Crores), with approval of GOTN and CEA (the “Capital Cost Ceiling”), which amount is less than the capital cost approved in the techno-economic clearance of CEA dated August 19, 1994 but which is as per foreign exchange rates assumed in the techno-economic clearance of CEA, shall not be included as “Capital Cost” except to the extent that CEA approves such excess costs as not having been attributable to the Company or the Company's suppliers or contractors. In determining the amount of costs actually incurred in completing the Project, account shall be taken of (i) any increase or decrease in project cost resulting from changes in the rates of exchange of the foreign currencies in which project expenditures are authorized to be incurred from the level set forth in Schedule 11 to the Agreement, (ii) (A) any reduction in interest during construction and principal amount of loans through the application delay liquidated damages received under the Construction Contract, as provided under Section 6.1(p), and (B) any excess liquidated damages or other compensation paid by the EPC Contractor to the Company and applied to reduce Capital Cost as provided in Section 2.1, (iii) any change to the debt equity ratio from the ratio assumed in the Approved Capital Schedule, and (iv) any excess insurance proceeds paid to the Company (after adjustment for the loss or damage to the Project and, to the extent not included in actual project cost, the cost of repair and replacement attributable to such loss or damage) in respect of any claims for loss or damage to the Project incurred prior to the Commercial Operation Date. Examples of the application of liquidated damages are provided in Schedule 10 to the Agreement. For purposes of determining the Capital Cost, all foreign currency loans and all foreign currency equity sources shall be converted into Rupees at the applicable Base Exchange Rate. It is understood and agreed that any increase or decrease in Capital Cost due to changes in foreign currency exchange rates shall be reflected in the amount of actual Capital Cost. In case the actually incurred cost is less than the ceiling cost of Rs. 1200 Crores, the lesser cost shall be taken as the Capital Cost. The Capital Cost includes interest during construction limited to a construction period of 38 months following the Effective Date, and shall not include any additional amounts for a longer construction period except with approval of CEA due to delays not attributable to the Company or the Company's suppliers or contractors.
The Company...
To continue reading
Request your trial
-
AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC
...and [2005] 1 Lloyd's Rep 67 (CA), OT Africa Ltd v. Magic Sportswear Corporation [2005] 2 Lloyd's Rep 170 (CA), and Tamil Nadu Electricity Board v. ST-CMS Electric Co [2008] 1 Lloyd's Rep 93 (Cooke J) ( cf National Navigation Co v. Endesa Generacion SA (The Wadi Sudr) [2010] 1 Lloyd's Re......
- Abuja International Hotels Ltd v Meridien SAS
-
AIG Financial Products Corporation v Tobias Gruber and 22 Others
...but not on this issue. He relied upon the judgment of Cooke J in Tamil Nadu Electricity Board v ST-CMS Electric Company Pte Ltd [2007] EWHC 1713 Comm); [2008] 1 Lloyd's Rep 93 at [98]–[101], where the judge refused to allow the claimant to rely upon English law by default given that it ha......
-
HKR Middle East Architects Engineering LC v English
...Dicey Morris & Collins cite the decision of Cooke J. in Tamil Nadu Electricity Board v. ST-CMS Electric Company Private Ltd [2007] EWHC 1713 (Comm). In that case, Cooke J., at para. 99, approved the following principles extracted from Fentiman ‘ Foreign Law in English Courts’:- (a) There is......
-
FOREIGN LAW IN DOMESTIC COURTS
...20Ascherberg, Hopwood & Crew Ltd v Casa Musicale Sonzogno di Pietro Ostali SNC[1971] 1 WLR 1128. 21[1999] 2 SLR(R) 419 at [14]. 22[2007] EWHC 1713 (Comm). 23 At [98]–[99]. 24 Citing Richard Fentiman, Foreign Law in English Courts: Pleading, Proof and Choice of Law (Oxford University Press, ......
-
RATIONALISING AND SIMPLIFYING THE PRESUMPTION OF SIMILARITY OF LAWS
...University Press, 1998) at p 144. This problem is partly resolvable through doctrines of abuse of process and natural forum. 97 [2008] 1 Lloyd's Rep 93. 98 Tamil Nadu Electricity Board v ST-CMS Electric Co Pte Ltd [2008] 1 Lloyd's Rep 93 at [99]. 99 Richard Fentiman, Foreign Law in English ......