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2G: Another Battle Brews

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While the Department of Telecommunications (DoT) is getting all set to conduct the auction of spectrum in the 1800MHz band later this month, there are other battles that have to be fought on the telecom front. The big fight relates to the notices to the Government of India for compensation on investments made by foreign investors in the sector.

Communications and IT minister Kapil Sibal has sent a note to the new law minister Ashwani Kumar to be prepared for a legal battle with Russia’s Sistema over cancellation of its 21 licences. In his letter Sibal says “Sistema JSFC, Russia may seek arbitration, hence it is important to take all requisite necessary measures like appointment of arbitrator, finalisation of legal team/counsel, firming up the stand of the Government for any eventuality.” Sibal has asked Kumar to expedite the “finalisation of panel of arbitrators from the Indian side having domain knowledge of telecom.”

This becomes all the more important since Sistema is not participating in the current auctions. It has filed a curative petition in the Supreme Court, seeking a review of the verdict cancelling its licences, since its case was different from that of the GSM service providers.

While the Department of Telecom has indicated that it will back Sistema’s petition, the final decision will come from the court.

Sibal wants the law ministry to set up a panel of arbitrators in case Sistema approaches the international court. Sistema had earlier sent a legal notice invoking the bilateral investment treaty signed between India and Russia. The deadline of August 28 for resolving the dispute is also over. However, Sistema can approach the international court only after all legal options are over.

Stepping up pressure on India, Russia has warned it that it will go for international arbitration if the issue of was not resolved in Indian courts.
"If the issue of cancellation of 2G license to Sistema is not resolved in Indian courts, we will go for international arbitration," Russian Ambassodor to India Alexander Kadakin said on the sidelines of a cultural event recently.

Sistema holds 56.68 per cent stake in Sistema Shyam Teleservices Ltd (SSTL) whose 21 out of 22 licences were cancelled by the Supreme Court in February on the grounds that the 122 permits issued by the then telecom minister A Raja were "arbitrary and unconstitutional". Russian government holds 17.14 per cent stake in SSTL.  Russia had previously asserted it will not let Sistema's $3.1 billion investment in its Indian telecom venture go waste due to "internal problems" here.
It remains to be seen how quickly the new law minister reacts to Sibal's letter.