Bechtel Enterprises and GE, the two United States companies that hold stakes in Dabhol Power Company, have filed an arbitration action against the Government of India, seeking about $600 million each as against their investment of $120 million each in DPC.

"We have attempted to resolve our legal and contractual claims but have been blocked at every turn," Rick Smith, executive vice president and managing director, Bechtel Enterprises, said in a statement on Monday.

"Regrettably, this international arbitration demand must be made," he said.

The arbitration action was filed by Bechtel Enterprises Holdings and GE Structured Finance, the affiliates that hold 10 per cent ownership interests in the $3 billion Dabhol power plant.

The claim was made under the arbitration rules of the UN Commission on International Trade Law and Indo-Mauritian investment trade treaty, the statement said.

"We will continue to pursue a full recovery of these investments through all available means," Scott Bayman, president, GE India, said.

"At the same time, we remain committed to helping to restart this much needed power generation facility. It is incumbent upon all responsible parties to make sure this happens in a fair and reasonable way," he added.

The total value of the claim may reach $600 million for each company. That represents their direct investments of about $120 million each and their shares of the market value of DPC specified in the power purchase agreement signed by the Maharashtra State Electricity Board and guaranteed by the Government of India. 

In this second arbitration, the two companies detail "systematic attempts by both state and national officials to deny DPC's rights relating to the power project."

This includes denying the ability to operate Phase I of the project, the completion of construction for Phase II, reimbursement of contractors, servicing of debt and payment of dividends to the sponsors.

The statement said MSEB's refusal to make payments under the PPA, improperly rescinding the PPA, and ceasing to buy power from DPC effectively destroyed the PPA -- the primary asset of DPC -- and represent an improper taking of the plant itself.

It said the Indian financial institutions seized control of DPC assets, depriving the companies of their investments.

Recently, an independent arbitrator in the US ruled in the companies' favour, finding that the Indian government and its agents illegally took the companies' interests in DPC, it noted.

The tribunal also ordered the political risk insurance claims held by the Overseas Private Investment Corporation, a US government agency, to be paid in the amount of $28.5 million for each company. The ruling is expected to trigger a US government claim for compensation against the Indian government, the statement said.

It said the Maharashtra Energy Regulatory Commission, an agency created after the PPA was signed, blocked the companies' ability to pursue the international arbitration provisions in the PPA. As a result, DPC was prevented from pursuing arbitrations against the MSEB and the governments of Maharashtra and India.

Under the India-Mauritius Bilateral Investment Treaty, each party appoints one arbitrator. Within two months of this, a third arbitrator is appointed by the two selected arbitrators. Bechtel and GE submitted their arbitrator's name to the Indian government on September five, 2003, thus beginning the 60-day panel selection process.

The arbitration will commence promptly after all arbitrators are chosen. The decision of the panel is binding, it said.