Following the cancellation of 122 2G licenses by Supreme Court of India all new operators lost the permission to operate in the country after a certain period.

It hits the foriegn partners of the affected mobile companies as they are the majority shareholders in those joint ventures and invested some thousand crores of rupees in the country.

Sistema JSFC, the majority shareholder (56.68%) in Sistema Shyam Teleservices Ltd (SSTL) has invoked its right to protect its investments in India as 21 licenses of SSTL was cancelled on February 2, 2012. SSTL offers CDMA mobile and data services in India under MTS India brand.

Sistema today announced that they have invoked its right under Article 9.1 of the Bilateral Investment Treaty (BIT) signed between the Government of the Russian Federation and the Government of India for the Promotion and Mutual Protection of Investments dated 23 December 1994 which came into force on 5 August 1996.

Article 9.1 of BIT provides an Investor from one Contracting Party and the other Contracting Party with an opportunity to amicably resolve a dispute arising in relation to investments made by the Investor in the territory of the State of the other Contracting Party. The procedures for the amicable resolution of such disputes include conciliation procedures under the Conciliation Rules of the United Nations Commission on International Trade Law.

Sistema in accordance with Article 9.1 of the BIT has sent a formal letter through its legal counsel to the Republic of India notifying India of the existence of the dispute and proposing to settle the dispute in an amicable way within 6 months (28th August 2012). A copy of the letter has also been sent to the Indian Embassy in Moscow.

As stated in the BIT, the Government of India is obliged to promote and protect foreign investments, including treating the investments in a fair and equitable way, providing them full protection and security, and not expropriating the investments.

Sistema believes it has a strong case and reserves the right to commence proceedings against India before an international arbitration tribunal set up in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) and/or in any other available forum if the dispute is not settled amicably within the deadline of 6 months.

Telecomtalk’s Take:

SSTL has already established their presence in Indian mobile and wireless data market under MTS brand. At this moment they cannot leave the market like Batelco or Etisalat.

This legal action by Sistema is a master stroke and holds their rights stronger than anything like filling petition against the court order. Indo-Russian business relations are always in a good shape for a long time and Russian Govt also has some stakes in the joint venture, Sistem Shyam Teleservices. So Govt of India must have to think to protect Sistema’s investments in India at any cost.

This step by Sistema will relieve all the employees, subscribers and public shareholders of Sistema Shyam Teleservices. Now it is high time for Telenor how they will protect their investment in the joint venture Uninor.