Former PERC chairman writes to Indian High Commissioner

INDIAN: Former Chairman of Public Enterprise Reforms Commission (PERC) Nihal Amarasekera has written to High Commissioner of India, Nirupama Rao, seeking her intervention to ensure that IOC fulfils forthwith its fundamental obligation and commitment to bring in the balance investment component of US $ 35 Mn. in foreign currency.

Following is the letter addressed to the High Commissioner.

Your Excellency would be apprised of the totality of the facts, inasmuch as Your Excellency, interceding on behalf of IOC/LIOC, had intervened, as far back as March 2005, with the Secretary, Ministry of Finance and the Snr. Advisor to Her Excellency the President. I believe that your Excellency had so intervened without having been fully apprised of the totality of the facts.

Most importantly, IOC had been afforded such opportunity, even without a 'transparent open competitive bidding process', on the premise of US $ 75 Mn. being brought into the country as 'purchase consideration' in foreign currency, as per the direction of the then Minister of Power & Energy, upon which premise Cabinet Approval had been granted.

Your Excellency is aware, that the Government, as far back as May 2005, had constituted a Committee, comprising Hon. Attorney General, Secretary, Ministry of Finance, Chairman Ceylon Petroleum Corporation and me, as then Chairman, PERC, to have discussions with IOC/LIOC to seek an equitable resolution in the face of the Opinion, which had been given by the Hon. Attorney General, and further corroborated by the Opinion of a leading President's Counsel, expertised in commercial law.

Inasmuch as the assurance of a 'reasonable return' on the US Dollar investment had been the objective of the Government in providing 'subsidies' to cushion any impact on the public, such 'subsidies; could not result in 'windfall profits'.

In any case, the fundamental condition that an investment of US $ 75 Mn, as 'purchase consideration' be brought in foreign currency and not be raised locally, clearly appears to have been breached and/or not fulfilled, giving rise to the question of the very validity and maintainability of the contractual arrangements let alone the validity of 'subsidy' claims made from the Government. I particularly cite below the following 2 paragraph from page 1 of my Note.

The IOC offer of US $ 75 Mn, had been justified on the basis of the 'business valuation' given by E&Y (Ernst & Young) of US $ 71 Mn. (US $ 40 Mn. for 33 1/3 % of the CUF Company + US $ 31 Mn for 100% of the 2nd Retail Company of 100 Filling Stations)

E&Y had also 'added a premium upto a maximum value of US $ 30 Mn for the market access for 'Dealer Owned - Dealer Operated' Filling Stations of franchise agents, expressing reservation that in a stand-alone negotiation with IOC that there is a risk that they may refuse to pay the full premium. I also cite below the final 2 paragraphs of my Note.

'In conclusion, the following citations from Judgements of Lord Denning MR perhaps would be pertinent in the context of diplomatic influences and nuances, vis-a-vis, this matter (1977) 1 All ER @ 892

"If the dispute brings into question, for instance, the legislative or international transactions of a foreign government, or the policy of its executive, the court should grant immunity if asked to do so, because it does offend the dignity of a foreign sovereign to have the merits of such a dispute canvassed in the domestic courts of another country, but if the disputes concerns, for instance, the commercial transactions of a foreign government (whether carried on by its own departments or agencies or by setting up separate legal entities), and it arises properly within the territorial jurisdiction of our court, there is no ground for granting immunity" - Rahimtoola v Nizam of Hyderabad

"....A foreign sovereign has no immunity when it enters into a commercial transaction with a trader here and a dispute arises which is properly within the territorial jurisdiction of our courts.

If a foreign government incorporates a legal entity which buys commodities on the London market, or if it has a state department which charter ships on the Baltic Exchange it thereby enters into the market places of the world and international comity requires that it should abide by the rules of the market" - Thai-Europe Tapioca Service Ltd. v Government of Pakistan