Seizing From An Alter Ego: Quebec Court Determines Whether The Assets Of State-owned Companies Can Be Validly Seized To Pay The Debt Of The Republic Of India.

• Published date: 03 March 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: McCarthy Tétrault LLP
• Author: The International Arbitration Blog, Omair Jafrani and Sandra Aigbinode

Overview

In CC/Devas (Mauritius) Ltd. c. Republic of India, 2022 QCCS 7, the Superior Court of Quebec had to determine whether the assets of two state-owned agencies were validly seized ex parte pending the homologation¹ of two foreign arbitral awards rendered against the Republic of India in favour of the Plaintiffs.

This case involves two seizures before judgment by garnishment effected in the hands of International Air Transport Association ("IATA"), that were authorized ex parte on November 24, 2021 ("First Seizure") and December 21, 2021 ("Second Seizure") in a Quebec Court at the request of the Plaintiffs who are seeking to execute their arbitral awards of over USD $111 million due by the Republic of India. Of note, the First Seizure and Second Seizure (collective, the "Seizures") were against the assets of two distinct legal entities, namely the Airport Authority of India ("AAI") and Air India, Ltd. ("Air India"), held by IATA, on the basis that these state-owned agencies are alter egos of the Republic of India. Both AAI and Air India were neither parties nor involved in the arbitration process.

Nevertheless, Justice Pinsonnault dismissed Air India's application to quash the Second Seizure and instead permitted the Second Seizure against the assets of Air India, albeit with a reduced scope of 50% of all the funds belonging to Air India, presently held by IATA. However, Justice Pinsonnault quashed and vacated the First Seizure against the assets of AAI in light of the provisions of the State Immunity Act, RSC 1985 c S-18.

Facts and Background

On January 28^th, 2005, the Plaintiffs² who are shareholders of Devas Multimedia Services Ltd. ("Devas"), entered into a contract with Antrix Corporation Limited ("Antrix"), a corporation wholly owned by the Republic of India. The agreement between the parties required that two satellites be launched into space by the Indian Space Research Organization, in addition to Antrix leasing spectrum capacity to the Plaintiffs (the "Agreement").

The Plaintiffs made the required payments, triggering Antrix's obligations under the Agreement. However, in July 2010, the Indian Space Commission adopted a resolution favoring the termination of the Agreement. On February 17^th, 2011, the Cabinet Committee on Security of India terminated the agreement. Then, on February 25, 2011, Antrix informed Devas that the Agreement was terminated by reason of Force Majure.

The termination of the Agreement triggered the arbitration process...