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London law to govern DPC confidentiality pact

S Ravindran

The contentious issue of the jurisdiction of the confidentiality agreement between the Dabhol Power Company on the one hand and Tata Power, BSES on the other hand, has been sorted out with all parties agreeing to be governed by London laws.

Sources in the domestic lenders consortium said that both BSES and Tata Power have agreed in principle to this but the confidentiality agreement is yet to be inked as other "minor issues" have cropped up.

BSES chairman and managing director RV Shahi said: "The draft of the confidentiality agreement is yet to be agreed upon. The concerns of the bidders have not been addressed." Adi J Engineer, managing director, Tata Power Company, could not be reached for comment.

DPC had been insisting that the jurisdiction of the agreement should be under US laws as Enron, General Electric & Bechtel which hold a combined 85 per cent stake in the company are all US-based.

Tata Power and BSES on the other hand have staunchly opposed this move and said the jurisdiction should be under Indian laws. They contended that since all the three companies involved - BSES, Tata Power and DPC - had been incorporated under the Indian laws, only Indian laws should prevail in this matter, too.

The agreement over the jurisdiction of the London courts is seen as a face-saving device. Since the Indian judicial system is modelled on the British one, Tata Power and BSES can take comfort in the fact that there is sufficient case law. DPC on the other hand can take heart as it has secured further international arbitration in case of a dispute.

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