|"Many energy companies have invested in closed or repressive countries -- arguing that their investment would help develop the local economy and thereby improve the human rights situation. But in this case, Enron has invested in a democratic country -- and human rights abuses there have increased. Enron hasn't made things better for human rights; it has made things worse."||
II. Background: New Delhi and Bombay
Table of Contents
V. Ratnagiri: Violations of Human Rights 1997
Appendix A: Correspondence Between Human Rights Watch and the Export-Import Bank of the United States
Appendix D: Correspondence Between the Government of India and the World Bank
The Munde Committee Report
Upon their election in March 1995, the new government under Chief Minister Manohar Joshi announced that it would review the Dabhol Power project.40 A committee chaired by Deputy Chief Minister Gopinath Mundethe Sub-Committee to Review the Dabhol Power Projectwas constituted on May 3, 1995.41 The committee undertook a comprehensive study of the project, reviewing thousands of pages of documents and interviewing representatives of numerous organizations concerned with the issue, including the company itself.
1. On the question of competitive bids:
2. On whether there was any secret or off the record negotiations:
3. On whether the capital cost of the Project is reasonable:
4. On whether undue favours and concessions have been given for the Project:
5. Whether the rate for power from the Dabhol plant is reasonable:
6. On the environmental aspects of the Project:
7. On whether the Project is useful to the State:
Based on these findings, the committee concluded:
[T]he arrangement in force is not tenable because of the infirmities pointed out above in the terms and conditions of the contract. It,therefore, recommends that Phase II of the Project should be canceled and Phase I should be repudiated. [sic]43
This outcome was stunning: the committee recommended cancellation of the largest single foreign investment in India. Its grounds were corruption, lack of transparency, the high costs associated with the project, and the lack of benefit to the state.
Chief Minister Manohar Joshi announced that Phase I would be stopped and Phase II would be canceled on August 3, 1995.44 In a speech to the Maharashtra legislature, Joshi said:
This agreement is an anti-Maharashtra agreement. This agreement is mindless and devoid of self-respect and to accept this agreement as it is shall amount to cheating the public. This agreement can never be called an agreement and therefore, it is important to uphold the self-respect and interest of Maharashtra by canceling this agreement even if that results in some financial burden.45
Following the announcement to cease construction, Enron initiated arbitration proceedings against the Maharashtra government in the United Kingdom during August 1995. The company stated that it wanted to recoup up to $600 million in costs because the contract was suspended but also stated that it was willing to renegotiate the PPA.46
In the proceedings in the High Court of Bombay, it is alleged that payments were made by the claimant in these arbitrations by way of illegal bribes. A contract which involves the bribery of a public official or officer is a contract procured by commission of a criminal offence. Not only is the making of a bribe a criminal offence, it also means that the officers and agents of the Maharashtra State Electricity Board (MSEB) who purported to contract on behalf of the board were exceeding their authority. An employee or agent has no authority to bind his principal to a fraudulent transaction. The consequence of this is that the MSEB were not contractually bound by the actions of their employees or agents purportedly on their behalf. This means that the MSEB never entered into the PPA. It was an agreement made by officers without authority to act. It therefore, does not bind the MSEB.48
On November 1, Enron officials apologized to the Maharashtra state government and offered a renegotiated project.49 The government, specifically the unelected leader of the Shiv Sena, Bal Thackeray, announced that the Enron people have accepted nearly all our conditions.50 However, the arbitration proceedings were not resolved, so the project remained in limbo.
40 Indian State Says Will Review Enron Project, Reuters, March 14, 1995.
48 Notes of arbitration proceedings between the government of Maharashtra and the Dabhol Power Corporation written by Christopher Carr and R.J. McGrane, lawyers for the government of Maharashtra, November 2, 1995, p. 7. Notes on file at Human Rights Watch.
50 Clarence Fernandez, Indian Leader Seems to Give Axed Enron Thumbs Up, Reuters, November 1, 1995. Bal Thackeray, founder and current leader of the Shiv Sena party is widely acknowledged as the final arbiter in Maharashtra government decisions despite the fact that he is not an elected government official and has never held public office.