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In this post, SUMIT RAI speculates on a possible investment treaty claim against India for the cancellation of 2G licenses following the Supreme Court decision of 2nd February 2012.

In 2011, the issue of corruption at the highest levels of governance dominated political and social debates in India. Allegations of loss to the exchequer to the tune of 300 billion rupees in the 2008 allotment of 2G spectrum for mobile telephony, shocked the nation. This probably also came as a shock to a large number of foreign investors – by then having infused huge capital in telecom companies. The telecom minister was made to resign and since has been in jail. Many corporate heads of Indian telecom companies also visited prison for a brief time and are now out on bail pending final investigation and prosecution.

Some citizens and NGOs filed a writ petition in the Indian Supreme Court under Art. 32 of the Constitution alleging that the grant of 122 2G spectrum licenses in 2008, following a first-cum-first-serve policy and at 2001 prices was in violation of citizens’ fundamental rights of the Constitution. On 2nd February 2012, the Indian Supreme Court upheld the petitioners’ contentions and cancelled all 122 licenses (the judgment in Centre for Public Interest Litigation v. Union of India is available here). The Court held that 2G spectrum is a natural resource and that “the State is the legal owner of the natural resources as a trustee of the people and although it is empowered to distribute the same, the process of distribution must be guided by the constitutional principles including the doctrine of equality and larger public good”. Read the rest of this entry