DPC: Arbitration begins

The offshore lenders to the Dabhol power project have started arbitration proceedings in London against the domestic lenders including IDBI, SBI and IFCI. A Notice of Arbitration has been filed on Thursday by foreign lenders under rules of the United Nations Commission on International Trade Law (UNCITRAL).

A press release issued by the offshore bank members of the Dabhol Power Corporation steering committee said, “The arbitration relates to a dispute under the Dabhol Intercreditor Agreement resulting from actions taken by Indian lenders who have blocked offshore lenders from pursuing rights embodied in the Dabhol financing documents”. As a step toward collecting their loans, the offshore lenders to Dabhol phase-I on April 3 voted to instruct DPC to proceed with termination of its power purchase agreement (PPA) with Maharashtra State Electricity Board (MSEB). To this, the Indian lenders obtained an injunction and blocked termination of the PPA, as sought by the foreign lenders.

“The Dabhol Intercreditor Agreement, to which both the offshore and Indian lenders are signatories, governs lender decision making including decisions on the termination of the PPA. The intercreditor agreement is governed by English law and provides that all disputes relating to it be settled by arbitration in London in accordance with UNCITRAL rules”, the release further added.