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MEMORANDUM OF DETERMINATIONS

Expropriation Claim of Gary Sigel and Southern Energy Partners, LLC

Annex G-036 to Master Contract of Insurance No. X-077

for Wind Turbines in Maharashtra State, India

DFC Project No. 9000024948 / DFC Contract No. 195

INTRODUCTION

1. Gary Sigel and Southern Energy Partners, LLC (jointly, the “Investors”) submitted an expropriation 

claim as of 20 October 2020 for up to ten wind turbines that are owned and operated by SEP Energy Pvt. 

Ltd., the Investors’ wholly-owned subsidiary (the “Foreign Enterprise”) located in the city of 

Ahmedabad, Gujarat State, India (the “Project”). 

2. The expropriation claim is compensable up to the insured percentage of the reduction in book value

attributed to the loss of generating capacity for certain wind turbines operated in the State of Maharashtra 

pursuant to Annex G-036 of Master Contract of Insurance No. X-077 (together, the “Insurance Contract 

Documents”). This determination considers certain circumstances surrounding a request that had been 

made by the Investors to amend the Insurance Contract Documents in 2016 to cover more than the 

number of turbines originally mentioned under the Insurance Contract Documents. The original terms 

included only four, 300kW turbines (bearing identification nos. 1A, 2A, 3A and 8A) located on the

“Shiriam EPC” wind farm in Satara, Maharashtra State. A fifth turbine was contemplated for coverage 

under the Insurance Contract Documents, subject to the Foreign Enterprise conclusion of contractual 

arrangements with the state’s distribution company, Maharashtra State Electricity Distribution Co. Ltd. 

(“MSEDCL”).

3. The Investors’ claim included ten turbines not initially specified under the Insurance Contract 

Documents. Upon review of the 2016 amendment process originally proposed to place these units under 

coverage, and notwithstanding attempts made by DFC to clarify to the Investor as late as 2020 that such 

amendment had not been concluded, the DFC concludes that doubts arising from the clarity of 

communications to the Investors about the status of the then-pending amendment warrant the constructive

incorporation of these additional turbines under the terms of the Insurance Contract Documents. 

Therefore, “Covered Property” for purposes of this Memorandum refers to the five turbines originally 

identified under Insurance Contract Documents, as well as the ten additional units submitted for 

consideration under an amendment. According to the Investors’ expropriation claim, premiums were paid 

with the intent of applying such payments to cover all fifteen turbines as Covered Property.1

4. A series of actions carried out by the Government of the State of Maharashtra, acting through the 

Maharashtra Electricity Regulatory Commission (“MERC”), substantially deprived the Foreign 

Enterprise of its right to sell power produced by the Covered Property under an electricity “bank” 

arrangement administered by MSEDCL. Previous regulations allowed independent power producers to 

store or “bank” renewable electricity during the monsoon months, with the electricity to be withdrawn 

during less windy times of the year. MERC effectively closed access to MSEDCL’s “bank” to privatesector generators like the Foreign Enterprise, leaving the “bank” open only for purchases of electricity

from state-owned electricity generators. 

5. The State of Maharashtra did not provide the Foreign Enterprise with prompt, adequate, and effective 

compensation following MERC’s actions. First, amounts owed to the Foreign Enterprise by MSEDCL 

1 See the discussion at paragraphs 20 through 23, below.
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for electricity previously “banked” with MSEDCL - and subsequently sold by MSEDCL to end-users -

were never compensated to the Foreign Enterprise in accordance with originally-agreed contractual terms

between the Foreign Enterprise and MSEDCL. Second, MERC did not provide the Foreign Enterprise 

with a reasonable time to seek direct-customer sales to compensate for the income lost from no longer 

benefiting from the MSEDCL’s electricity “bank.” 

6. For the reasons stated, below, the DFC determines that the Investors are jointly entitled to 

compensation in the amount of US$125,871.65, which is based on 90% of the payments due from 

MSEDCL for services provided by the Foreign Enterprise. This amount reflects a diminution of the book 

value attributed to the Covered Property, determined as of the date that the Foreign Enterprise was 

deprived of access to the “banking” program from June 2019 through September 2019.

CLAIM

7. The Investors claim that the State of Maharashtra, acting through MERC in concert with MSEDCL, 

used its regulatory authority to benefit state-owned electricity generators utilizing MSEDCL’s energy 

“bank” by intentionally discriminating against private-sector electricity providers, thereby, substantially 

depriving the Foreign Enterprise of existing rights under MSEDCL regulations for energy “banking.” 

The scheme to deprive the Foreign Enterprise of access to the MSEDCL’s “bank” was implemented 

through changes to “open access” regulations that did not account for the seasonal nature of the electricity 

market in Maharashtra, and were carried out over a two-day period such that the Foreign Enterprise was 

deprived of any reasonable opportunity to seek direct-sale customers to replace losses arising from no 

longer having access to MSEDCL’s “bank.” The schedule for MERC to approve continuing access by 

private-sector electrical generating companies to MSEDCL’s “bank” called for final determinations to be

made at the beginning of the monsoon season in Maharashtra – thereby precluding any opportunity by the 

Foreign Enterprise to seek direct-sale customers to mitigate the immediate economic effect of these 

determinations. Additionally, the transition period specified by MERC, from the pre-existing regulation 

to operation under the replacement regulation occurred within a two-day period. Further, MSEDCL did 

not even compensate the Foreign Enterprise for the value of electrical energy already “on deposit” with

the “bank” prior to the transition.

8. When the Investors sought relief in Maharashtra state courts in response to these actions, the judiciary 

substantially acknowledged that the determinations made by MERC effectively discriminated against the 

Foreign Enterprise and similarly situated, privately-owned generating companies.

9. The Investors’ final claim application includes a narrative and supporting documents. The package, as 

supplemented by the Investors, is attached as Exhibit A to this Memorandum.2 

FACTUAL BACKGROUND

A. FACTS

10. The availability of electrical power from wind-power and other renewable sources of electricity is 

sensitive to weather and climate conditions. Much of India experiences a dry season between January and 

June, with two regional monsoon seasons (Southwest monsoon between June and October, and a 

Northeast monsoon between November and December). Maharashtra’s monsoon season extends from 

2 Each page of the application has been Bates-stamped for ease of reference. Unless stated otherwise, references in 

this Memorandum to “Ex. Page(s) X” are to Bates-stamped page numbers.
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June through September. During the dry season, generating companies produce more electricity than the 

market can absorb, with electricity generating companies eager to sell excess generation to direct-sale 

customers willing to buy power at favorable prices. However, monsoon rains significantly reduce output 

– and in the case of wind-power generators like the Foreign Enterprise, all but preclude generation – to 

the point that electrical power becomes relatively scarce, and expensive in the marketplace. The market 

for sales of electrical power stands still during these months. 

11. In 2003, the State of Maharashtra restructured the electricity market to separate state regulatory and 

electricity-distribution functions under the Electricity Act, 2003. Two key State entities, MERC and the 

MSEDCL, emerged from these changes. MERC was authorized to issue generating and operating 

licenses to qualified entities (both state-owned and privately-owned), regulate competition through rate 

reviews, and set rules for “open access” in the sale of electricity. Open access to the electricity market 

has permitted both direct sales by generators to end-users as well as the “banking” of electrical power 

through another state entity, the MSEDCL. 

12. To balance the availability and pricing of electrical power throughout the year – especially during the 

monsoon season - MSEDCL operated a “banking” dispatch and compensation scheme in support of 

annual, renewable agreements (known as “wheeling” agreements) between electricity generators and their 

customers. Under such “wheeling” agreements, electricity generators contracted with generating 

companies for power to be delivered through the grid administered by MSEDCL. Pursuant to regulations 

renewed or updated on an annual basis, electricity generators would register their respective generation 

units with MSEDCL for dispatch purposes and register contract prices with MERC for purposes of 

determining how much would be dispatched and paid directly, and how much owed by each end-user for 

dispatched energy would be “credited” by MSEDCL in the “bank” for the benefit of the applicable 

generating company for later payment from the “bank.” MSEDCL would dispatch renewable-energy 

generators and leave fossil-fueled generators relatively quiet during the dry season, “crediting” the 

contracted value of a portion to the “bank” for dispatched electricity by renewable-energy generators.

During the monsoon season, MSEDCL in effect would reverse the dispatch order (dispatch fossil-fueled 

generators and leave renewable-energy generators relatively quiet, “crediting” into the “bank” a portion of 

the contracted value of dispatched electricity by fossil-fueled generators). In return for this approach to 

dispatch, pursuant to the regulations, the state-owned distribution company would use “bank” proceeds 

under “wheeling” agreements to pay fossil-fueled generators for the electricity these entities had provided 

during the previous monsoon season. Then, during the next monsoon season, MSEDCL would pay 

renewable generators out of the “bank” for the electricity provided during dry season under “wheeling” 

agreements during that monsoon season. So long as the difference in tariffs payable to fossil-fueled and 

renewable electricity providers was relatively manageable for MSEDCL’s overall balance sheet, with 

MERC monitoring tariff levels under each “wheeling” agreement to ensure a relative equivalence of tariff 

rates between renewable providers and fossil-fueled electricity providers, the “banking” scheme 

functioned without any need by the State of Maharashtra to supplement MSEDCL shortfalls should

“bank” balances exceed MSEDCL’s collections. 

13. In June 2007, the Investors extended a shareholder loan to the Foreign Enterprise to acquire four, 

300kW wind turbines to generate electricity for sale to MSEDCL under the “banking” scheme. By 

August 2012, the Foreign Enterprise had entered into “wheeling” agreements with two hotel chains (the 

Investors provided the latest versions of the agreements for each of the Fleur Hotel and Meringue Hotel 

chains at Ex. Pages 315-346) to sell power generated and scaled up the enterprise to fifteen turbines by 

2016 (Ex. Pages 012-017), registering these units with MSEDCL (Ex. Pages 005-011).

14. In 2018-19, the cost of generating electricity using fossil-fueled generators dropped substantially in 

comparison with renewable energy generators, like the Foreign Enterprise. As tariffs charged by fossilfueled generators dropped in line with the worldwide decline in fossil-fuel input prices, the disparity in 
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pricing between fossil-fueled electricity providers and renewable electricity providers brought about a

MSEDCL balance-sheet deficit during the monsoon season – as amounts payable from the “bank” to 

renewable electricity providers for power provided during the prior dry season exceeded collections from 

end-users under fossil-fueled electricity providers’ “wheeling” agreements. As a result, the State of 

Maharashtra faced the prospect of having to subsidize MSEDCL to make up the shortfall. 

15. Consequently, MERC initiated a series of actions effectively designed to exclude renewable 

electricity providers from the “bank” before the 2019 dry season. On 11 March 2019, MERC published a 

proposed revision to the “banking” regulations that effectively would require renewable electricity 

providers to substantially lower tariff rates or face being excluded from the “bank.” The Investors 

provided a summary of these regulatory changes, between the 2016 regulations and the then-proposed 

2019 regulations (Ex. Page 347). By 8 June 2019, the revised regulation was published and became 

effective by the next day. Renewable electricity providers had only two calendar days in which to entirely 

renegotiate pricing with existing customers or find new customers. The Foreign Enterprise was not 

afforded a transition period to re-balance its customer mix or negotiate prices under “wheeling” 

agreements to cope with the new regulatory scheme. Besides, prospective new customers favored lower 

tariffs offered by fossil-fueled electricity providers at the start of the monsoon season (June), and 

contracted for electricity with fossil-fueled providers. The timing of the new regulatory scheme left

renewable providers – who typically would have been better-positioned to attract new customers at the 

start of a dry season (October) – starving for business.

16. For the period June through September 2019, the Foreign Enterprise did not receive any payments to 

which it was entitled from the “bank” for electricity provided during the prior dry season. MSEDCL 

withheld such payments, which – in addition to the substantial deprivation of rights against the Foreign 

Enterprise occasioned by MERC’s new regulations – has given rise to the amounts claimed by the 

Foreign Enterprise as compensable under the Insurance Contract Documents.

17. By October 2019, wind-power producers (including the Foreign Enterprise) filed several suits, 

questioning whether MERC afforded these entities a reasonable opportunity to respond to the proposed 

regulation, as well as provide reasonable time to adapt to the new “bank” regulations. By December 

2019, MERC regulations had been upheld by lower courts, prompting appeals that have been pending 

since February 2020. To date, no hearings or rulings have been concluded – partially on account of the 

COVID-19 pandemic.

18. In effect, the combined effect of MERC’s two-day regulatory process and MSEDCL “slow-pay/nopay” approach to the Foreign Enterprise, constitute expropriatory acts for which no prompt, adequate and 

effective compensation was provided by the State of Maharashtra.

B. PROCEDURAL FACTS

19. On 10 December 2019, the Investors notified the DFC of a potential expropriation claim, followed as 

of 17 April 2020 by a partial, initial claim application. The Investors supplemented the application as of 

21 May 2020 to submit a completed, initial claim application. After preliminary review of the papers, the 

DFC requested as of 28 July 2020 that the Investors provide supplementary or clarifying information to 

show how the claim submission aligned with the Insurance Contract Documents’ requirements for a 

compensable claim. The Investor provided supplementary information as of 20 October 2020, finalizing 

the claim submission. 

20. As early as October 2016 and as late as 23 September 2020, the Investors claimed that all units 

operated by the Foreign Enterprise in Maharashtra State had been covered under the Insurance Contract 

Documents. The Investors attached the following chart, listing fifteen turbines as Covered Property under 
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Annex G036 (the annex to the Master Insurance Contract for Covered Property in Maharashtra), to their 

election of coverage for the period 30 September 2020 through 30 March 2021:

Existing 

Policy

State Machine 

Number

Manufacturer Capacity Year 

Commissioned

G036 Maharashtra 1A Elecon 300 kW 2012

G036 Maharashtra 2A Elecon 300 kW 2012

G036 Maharashtra 3A Elecon 300 kW 2012

G036 Maharashtra 8A Elecon 300 kW 2012

G036 Maharashtra S1 Vestas RRB 225 kW 1999

G036 Maharashtra S2 Vestas RRB 225 kW 1999

G036 Maharashtra S3 Vestas RRB 225 kW 2000

G036 Maharashtra S4 Vestas RRB 225 kW 2000

G036 Maharashtra S5 Elecon 300 kW 2012

G036 Maharashtra S8 Vestas RRB 500 kW 2001

G036 Maharashtra M1 Vestas RRB 225 kW 1999

G036 Maharashtra M2 Vestas RRB 225 kW 1999

G036 Maharashtra T1 Vestas RRB 225 kW 1998

G036 Maharashtra T4 Vestas RRB 225 kW 1998

G036 Maharashtra T5 Vestas RRB 225 kW 1998

21. In response to the attached chart, DFC indicated to the Investors as of 25 September 2020 that only 

the Elecon manufactured turbines (see, Machine Nos. 1A, 2A, 3A, 8A and S5) were covered under the 

Insurance Contract Documents:

The list of machines you sent in advance of submitting the EOCs in your email to DFC 

dated September 30, 2020 is comprised of a mix of machines, some that are covered by 

[the Master Contract] and Annex [G036] terms and others that are NOT covered. Please 

refer to the definition of “Insured Investment” in the [the Master Contract] (§1.01.1). 

Therefore, DFC does not consider the EOCs list to be accurate representations of the 

Investment covered by the [the Master Contract] and Annexes.

We addressed this same issue by correspondence exchanged during late 2019 and early 

2020. For reference, I draw your attention to copies of the correspondence attached 

hereto as “Email-1” (December 11, 2019), “Email-2” (December 17, 2019), and “Email3” (February 18, 2020). Having confirmed at that time that certain investments were not 

insured under the [the Master Contract] and Annexes, and that issuance of new coverage 

under the [the Master Contract] requires the Investor to apply to DFC and enter into an 

amendment to evidence coverage for such investments under coverage (§1.11), DFC 

understands that no such amendment for new coverage has been issued since our 

exchange of the correspondence, referenced above.

We ask that you ensure that the premium being paid for the current coverage period due, 

and all subsequent coverage periods, coincide with the actual Insured Investment, as

defined in the [the Master Contract] (§1.01).

Under the strict terms of the Insurance Contract Documents, the Investors had not concluded: 
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(i) the power purchase agreement originally contemplated to fulfill a condition of coverage 

for one of five originally designated wind turbines (Machine No. “S5” in the chart, 

above); and,

(ii) an amendment with DFC to expressly include up to ten additional wind turbines under 

the Insurance Contract Documents beyond the originally-designated turbines, which were 

subject to review of applicable environmental and social conditions by the predecessor to 

the DFC’s Office of Development Policy. 

While the Investors submitted a claim for fifteen turbines as Covered Property, the Insurance 

Contract Documents expressly covered only four wind turbines under the Insurance Contract 

Documents. Nevertheless, the claim application includes communications of intent by DFC to 

include all fifteen turbines, and reliance by the Investors on such statement of intent without 

further DFC clarification. This reliance by the Investors is evidenced by a succession of elections 

of coverage, and premium payments consistent with such coverage elections, having been made 

between 2016 and 2020 without contemporaneous correction by DFC.

22. On 27 May 2016, the DFC responded to the Investors’ request to add the new turbines, as 

follows, “We are going to amend the previous annex to include the new turbines. Our Office of 

Investment Policy is ok with this, I am working with them to transmit the 248 info to them you 

have completed thus far. They will still need to review it. I will keep you posted.” (Ex. Page 

027.) As of at least July 2016 (Ex. Pages 033-034), the Investors consistently indicated their 

understanding that all fifteen turbines were within coverage. In October 2016, the Investors 

indicated in its election of coverage information that all fifteen turbines were included in the 

calculation of premium due at the time (Ex. Pages 028-029). All self-monitoring questionnaires 

submitted between 2016 and 2020 reflected all fifteen turbines in the Maharashtra operation of 

the Foreign Enterprise. Not until 2019-20 did DFC attempt to clarify between an intent to cover 

the additional turbines and concluding an amendment establishing such coverage. DFC’s

acceptance of coverage elections, as submitted by the Investors, coupled with the inclusion of all 

fifteen turbines in successive self-monitoring questionnaires provided between 2016 and 2019 –

all without response or clarification by DFC during that time – operates effectively as the 

constructive inclusion of such ten additional turbines under coverage for purposes of the 

Insurance Contract Documents.

23. Given the above, DFC determines that sufficient evidence exists to show coverage for all fifteen 

turbines, even if an amendment executed according to the Insurance Contract Documents’ provisions was 

not concluded. DFC considers that, at the very least, a discernible constructive amendment of the 

Insurance Contract Documents is reflected by the claim submission documents. 

DETERMINATIONS UNDER THE CONTRACT

A. SCOPE OF COVERAGE; ELEMENTS OF CLAIM

24. The Master Contract (X-077), executed and delivered 28 September 2010, provides 90% coverage 

against inconvertibility, expropriation, political violence for assets, and political violence for business 

income loss in respect of shareholder loans made by the Investors to “foreign enterprises.” The remaining 

10% of such losses are retained by the Investors as self-insurance. Annexes attached to the Master 

Contract described investments made by the Investors in such “foreign enterprises” to be insured by DFC 
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for the coverages specified under such annexes.

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 Annex G036, issued by DFC on 30 September 2012, 

provided for DFC insurance of the Investors’ $2,150,000 investment in the Foreign Enterprise, up to a 

maximum aggregate compensation of $1,935,000, originally covering four turbines (with a fifth subject to 

completion of contract) rated at 300kW, identified as turbine sites 1A, 2A, 3A, 8A and 8B. The amount 

of “active” coverage and “standby” coverage was elected by the Investors on a semi-annual basis. 

Premium for such semi-annual period was based on the “active” coverage elected. For the period under 

the Investors’ claim, “active” coverage was elected at $890,000. Coverages specified under Annex G036 

included inconvertibility, expropriation, political violence (assets) and political violence (business 

income). Annex G036 identified the Investor only as Southern Energy Partners, LLC, as the sole direct 

owner of the Foreign Enterprise. 

25. The Investors’ claim, completed as of 20 October 2020, was for expropriation of covered property, 

viz., the turbines constituting the operations of the Foreign Enterprise in Maharashtra. The Insurance 

Contract Documents include coverage for “expropriation,” including the “Covered Property” 

characterized by the Investors as “all of the Maharashtra assets” (Ex. Page 039; see also, Ex. Pages – 003, 

019-021, 027, 034-036, 037). 

26. The Investors’ claim application explicitly seeks compensation for “expropriation-covered property”

under Section 4.02 of the Master Insurance Contract. (Ex. Page 039). Section 4.02 lists the elements of 

coverage for expropriation under the Insurance Contract Documents:

(1) The [act(s) or series of act(s) of a Foreign Governing Authority]:

(i) constitute an outright taking of all or part of the Covered Property; or

(ii) have the effect of taking all or part of the Covered Property in that the act(s)

(A) deprive the Investor of its fundamental rights, or prevent, unreasonably interfere 

with, or 

(B) unduly delay effective enjoyment of the Investor’s fundamental rights, in all or part 

of the Covered Property (rights are “fundamental” if without them the insured is 

substantially deprived of the benefits of all or part of the Covered Property);

(2) the taking is not accompanied by prompt, adequate, and effective compensation; and,

(3) the act(s) and/or the expropriatory effect thereof continue (§9.01.9) for six consecutive 

months.

Compensation under Section 4.02 is subject to exclusions (Section 4.06), limitations (Section 5.06), and 

the Investors’ compliance with duties specified under Section 9.01 of the Master Insurance Contract.

27. Foreign Governing Authority - The Master Insurance Contract defines “Foreign Governing 

Authority” under Section 1.01.3:

Foreign governing authority means any of ... (b) the government of any political 

subdivision of the Project Country; (c) any organ, agency, official, employee or other 

3 The Master Contract replaced Contract of Insurance No. F662, executed and delivered 18 June 2007, with Annex 

G037 and Annex G067 attached to the Master Contract for the Foreign Enterprise’s operations in the State of Tamil 

Nadu.
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agent or instrumentality of ... (b), acting within the scope of its authority or under color 

of such authority... .

The State of Maharashtra is a political subdivision of India, satisfying part (b) of the definition. Each of 

MERC and MSEDCL are organs of the State of Maharashtra, satisfying part (c) of the definition. As 

such, actions by each of MERC and MSEDCL are attributable to the State of Maharashtra because of 

their structural incorporation into the apparatus of state regulation. Azurix Corp. v. Argentine Republic, 

ICSID Case No. ARB/01/12/Award of 14 July 2006, ¶ 50. The attributive connection between state 

organs and the central government is well-established under customary international law, as recognized 

under Article 4 of the International Law Commission’s “Articles on Responsibility of States for 

Internationally Wrongful Acts” (the “ILC Draft Articles”). The Commission’s official comments to 

Article 4 state, with regard to the actions of an political sub-division’s organ being attributed -ultimately -

to the central government, “Thus, the reference to a State organ in article 4 is intended in the most general 

sense. It is not limited to the organs of the central government, to officials at a high level or to persons 

with responsibility for the external relations of the State. It extends to organs of government of whatever 

kind or classification, exercising whatever functions, and at whatever level in the hierarchy, including 

those at provincial or even local level.” Draft Articles on Responsibility of States for Internationally 

Wrongful Acts, with commentaries, YEARBOOK OF THE INTERNATIONAL LAW COMMISSION, 

YBILC, ii. 2001, Vol. II, Part Two (2001), Comments on Article 4 at ¶ 6 (emphasis added). 

28. State action - In addition to their structural incorporation within the apparatus of the State of 

Maharashtra, actions taken by both MERC and MSEDCL are authorized pursuant to statute, the 

Electricity Act, 2003, expressly to regulate the generation and distribution of electricity for the State of 

Maharashtra. The regulations implementing the Act, updated on a periodic basis of one to two years, 

identifies MERC as the “Commission” authorized to administer generation and distribution, as well as the 

approval of pricing to meet demand. (See, e.g., Ex. Page 099; the published fee schedule is payable “in 

accordance with the Schedule of Charges approved by the Commission from time to time.” Emphasis 

added.) Section 31 of the Act establishes the MSEDCL. Under the regulations, the functions for the 

“state load despatch centre” in Maharashtra fall within the ambit of authorities assigned to MSEDCL, 

among other functions. (Ex. Page 207; see also, approvals issued by MSEDCL for ownership changes in 

turbines, explicitly identifying itself as “competent authority,” at Ex. Pages 014, 107.) These attributes 

are consistent with authorities recognized under customary international law as “acta iure imperii” in 

carrying out regulatory functions exclusively reserved to the state. Maffezini v. Spain, ICSID Case No. 

ARB/97/7 (Decision on Objection to Jurisdiction of 25 Jan. 2000) ¶ 79 (looking to the “functions of or 

role to be performed by” an entity to determine if such entity was empowered to perform typically 

sovereign functions, as in the case of regulation). Actions by both MERC and MSEDCL in the 

publication and adoption of new regulations in 2019 that effectively discriminated against the Foreign 

Enterprise were taken in their respective capacities as the electricity regulator and electricity distribution 

company, respectively. As noted in Article 5 of the ILC Draft Articles, “[A]rticle 5 refers to the true 

common feature [without regard for whether the entity is public or private in its composition], namely 

that these entities are empowered, if only to a limited extent or in a specific context, to exercise specified 

elements of governmental authority.” Draft Articles on Responsibility of States for Internationally 

Wrongful Acts, with commentaries, YEARBOOK OF THE INTERNATIONAL LAW COMMISSION, 

YBILC, ii. 2001, Vol. II, Part Two (2001), Comments on Article 5 at ¶ 3.

29. Taking of all or part of the Covered Property – The failure of MSEDCL to remit to the Foreign 

Enterprise amounts on “deposit” at the electricity “bank” for energy generated during the prior “dry” 

season constituted a taking in part of the Covered Property’s generating capacity (resulting in diminished 

generating income for the Foreign Enterprise). Further, the implementation at the beginning of the 

“monsoon” season of replacement regulations by MERC without affording renewable energy providers –

including the Foreign Enterprise – sufficient time to seek direct-sale contracts with end users to replace 
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revenues to become lost as a result of the new regulations constitutes a further taking by the State of 

Maharashtra. Implementing the new regulations at precisely the time in which potential end-user 

customers would be least attracted to renewable electricity sources – the beginning of monsoon season –

effectively deprived the Foreign Enterprise of the customer base it would have been able to attract if the 

implementation were to occur at practically any other time during the year.

30. Unduly delay effective enjoyment of the Investor’s fundamental rights – The Master Insurance 

Contract defines a “fundamental” right in terms of substantial deprivation of the benefits of all or part of 

the Covered Property. Master Insurance Contract at Section 4.02(1). Under the terms of the “banking” 

regulations in effect during the dry season beginning in June 2019, the Foreign Enterprise enjoyed the

right to generate electric power to its end-users under contracts that had been approved for inclusion by 

the MSEDCL under the “banking” scheme. The failure by MSEDCL to provide timely payment from the 

“bank” effectively for such generated electric power substantially deprived the Foreign Enterprise from 

the operation of the wind turbines generating electricity through the “banking” scheme. The 

uncompensated taking of that generated electric power is recognized under the customary international 

law of expropriation to the extent that there is a “substantial reduction” in the value of the enterprise 

caused thereby. Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v. 

Uruguay, ICSID Case No. ARB/10/7 (Award, 8 July 2016). This standard applies to MSEDCL’s failure 

to pay amounts owed to the Foreign Enterprise for the electric power generated by the wind turbines. The 

deprivation is aided by the regulatory actions undertaken by MERC, in support of MSEDCL’s shift 

toward cheaper, fossil-fueled electricity providers at a time when the State of Maharashtra faced potential 

budgetary shortfalls in MSEDCL – all to the detriment of renewable providers, including the Foreign 

Enterprise. Such support by MERC results in a discriminatory exercise of police powers that is not 

condoned under customary international law. See American Law Institute, THIRD RESTATEMENT OF 

THE FOREIGN RELATIONS LAWS OF THE UNITED STATES (1987), vol. 1, ¶ 712, comment (g).

31. The three-month delay suffered by the Foreign Enterprise might not be considered sufficient in 

duration to constitute a “substantial” deprivation of benefits of the Investors’ investment. However, the 

additional six months of inactivity at the Foreign Enterprise directly caused by MERC’s decision to 

change the regulatory scheme right at the beginning of the monsoon season, combined with MSEDCL’s 

refusal to afford the Foreign Enterprise any reasonable time to mitigate the effects of such new 

regulations, is recognized as patently compensable under customary international law (Bechtel 

Enterprises Int’l v. Overseas Private Investment Corporation, AAA Case No. 50 T195 0059 02 

(Determination, 25 Sep. 2003) at 25). 

32. Prompt, Adequate and Effective Compensation – Failure by the MSEDCL to make payments to the 

Foreign Enterprise owed from the “bank”, coupled with the effective exclusion of the Foreign Enterprise 

from the “bank” scheme orchestrated by MERC under new regulations without the means afforded to at 

least mitigate the impact of these changes, left the Investors without any prompt, adequate and effective 

compensation. At the very least, the Foreign Enterprise should have received reparation for the damage 

caused by the acts of MERC and MSEDCL. The ILC Draft Articles note that the “responsible state [for a 

wrongful act] is under obligation to make full reparation for the injury caused by the intentionally 

wrongful act.” (Draft Articles on Responsibility of States for Internationally Wrongful Acts, Int’l Law 

Comm’n, Rep. on the Work of its Fifty-Third Session, UN Doc. A/56/10 (2001), article 31(1). Emphasis 

added.) The circumstances in this situation resemble the case of Marion Unglaube et al. v. Republic of 

Costa Rica (ICSID Case No. ARB/08/1 (Award of 16 May 2012)). As in the present situation, no 

provision was made by the Costa Rican authorities for the payment of timely and adequate compensation 

when the State exercised eminent domain rights over the resort property of the claimant. 

33. act(s) and/or the expropriatory effect thereof continue for six consecutive months – The Master 

Insurance Contract requires a waiting period of at least six consecutive months before a claim is filed 
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under the Insurance Contract Documents. During that waiting period, the expropriatory effect of the 

underlying acts giving rise to the claim must be continuous. As described above (paragraphs 15-16), an 

excess of six months had transpired between the effectiveness of the MERC’s new regulations and the 

end of the monsoon season, at which time the Foreign Enterprise could begin to compete again for direct 

contracts with end-users.

B. EXCLUSIONS AND LIMITATIONS

34. Section 4.06 of the Master Insurance Contract lists several exclusions that, if present under the 

Investors’ expropriation claim, preclude coverage and deny compensation. A review of these exclusions 

in the context of the Investors’ claim does not give rise to a right by DFC to deny compensation.

35. Section 4.06(a) of the Master Insurance Contract excludes coverage if the “preponderant cause” of a 

claim expropriation is either: 

(i) actions, other than actions taken in the ordinary course of business, attributable to the 

Investors, the Foreign Enterprise, or the controlling equity holder of the Foreign 

Enterprise, provided such actions are in any way related to the Foreign Enterprise’s 

Maharashtra operations; or 

(ii) violations of Corrupt Practices Laws by the Investor, the Foreign Enterprise, or such 

controlling equity holder.

As noted under paragraphs 14-16, above, none of the Investors, the Foreign Enterprise or equity holders 

of the Foreign Enterprise took any actions that provoked the regulatory changes implemented by MERC 

and the MSEDCL’s withholding of payments owed to the Foreign Enterprise from the electricity “bank.” 

There have been no allegations of corrupt practices attributed to any of the Investors, the Foreign 

Enterprise or equity holders of the Foreign Enterprise.

36. Section 4.06(b) of the Master Insurance Contract excludes coverage for Foreign Governing Authority 

actions under commercial (as distinguished from governmental) functions in respect of the Maharashtra 

operations of the Foreign Enterprise. As noted under the analysis in paragraph 28, above, the 

discriminatory actions by both MERC and MSEDCL against the Foreign Enterprise were taken under

their respective capacities as the electricity regulator and electricity distribution company, respectively. 

Both functions are governmental in nature, constituting acta jure imperii rather than commercial 

functions.

37. Section 4.06(c) of the Master Insurance Contract excludes coverage for Foreign Governing Authority 

actions taken pursuant to lawful authority under “licenses, permits, or concessions” between the Foreign 

Governing Authority, on the one hand, and either the Investors or the Foreign Enterprise, on the other 

hand, in connection to the Foreign Enterprise’s operations in Maharashtra. The Foreign Enterprise’s right 

to operate an electricity generation business in Maharashtra was based on MSEDCL’s issuance of permits 

accepting generation from each turbine through the electricity “bank” for delivery to end-users under 

“wheeling” contracts, and the Foreign Enterprise’s compliance with MERC’s regulations in effect. 

MERC’s revision of regulations on a discriminatory basis (see discussion at paragraphs 30-31, above), 

coupled with the MSEDCL’s failure to remit amounts on “deposit” in the electricity “bank” owing to the 

Foreign Enterprise were not actions taken under lawful authority such as to raise the exclusion against 

coverage under the Master Insurance Contract.

38. Sections 4.06(d) and 4.06(e) specify exclusions in respect of the use and maintenance of real property 

rights, and the exercise of termination rights by a Governmental Entity (as defined under the Insurance 
11

Contract Documents) under a power purchase agreement. None of these exclusions apply to the 

Investors’ claim.

C. COMPLIANCE WITH CONRACTUAL REQUIREMENTS

39. To maintain coverage under the Insurance Contract Documents, the Investors must show compliance 

with all duties under Section 9.01 of the Master Insurance Contract. Sanctions for material breaches of 

these duties by the Investors includes, pursuant to Section 9.02 of the Master Insurance Contract, a right 

by DFC to refuse to pay compensation for otherwise compensable claims.

40. The Investors represented as to having “complied with all of the Duties mentioned in the SEP Master 

Contract with all the points mentioned therein.” (Ex. Page 77.) The Investors also submitted a Certificate 

for Expropriation Claim (Ex. Page 384) with the claim submission to certify Master Contract 

compliance. Without limiting DFC’s reliance on the certifications made by the Investors regarding such 

Investors’ compliance with all Investor Duties under the Master Contract, below is a summary of the 

duties, with references to the Investors’ claim application or other source of information:

# Duties Synopsis Ex. Page(s); other source

1 Representations and 

Warranties

All statements true and correct; Project 

carried out per terms of Annex

77; 384

2 Ownership and Eligibility Beneficial owners fulfill US eligibility 

requirements

384

3 Resumption of Operations All reasonable actions to resume project 

operations without undue expense

384

4 Assignment No assignment of Master Insurance 

Contract by Investors

77; 384

5 Premium Timely payment; late payments subject 

to interest

[confirmed by Office of Portfolio

and Financial Management]

6 Accounting Records Maintenance of Foreign Enterprise 

accounting records, including annual 

financial statements; US-GAAP 

compliant

348-378

7 Reports and Access to 

Information

Timely and complete provision of 

Project-related information, including 

site visits and personnel interviews; 

record retention policy compliance

77

8 Compulsory Notice Prompt notice of acts that may come 

within scope of coverages

[notice of potential claim,

dated 7 April 2020]

9 Preservation, Transfer and 

Continuing Cooperation

Reasonable measures to preserve 

properties and claims to facilitate postclaim assignments to DFC

77; 384

10 Other Agreements No arrangements with Foreign 

Governing Authority not otherwise 

disclosed to DFC

24-36; 384

11 Worker Rights Compliance with ODP social 

requirements

[Office of Development 

Policy confirmed compliance]

12 Other Insurance No other insurance coverage 384

13 Information Disclosure If coinsured, consent to sharing of 

information with other DFC co-insurers

77

14 English language 

translations

If documents in language other than 

English, provision of translations on 

which DFC may rely

77
12

15 Legality Maintenance of all project permits and 

licenses; compliance with local laws; 

no incipient disputes; general 

compliance with master insurance 

contract terms

77

16 Environmental Compliance Compliance with ODP environmental 

requirements

[Office of Development 

Policy confirmed compliance]

17 Corrupt Practices Compliance with US and India corrupt 

practices laws

77

18 Compliance with Law General and project-specific legal 

compliance

77

D. COMPENSATION

41. The Investors requested compensation in the amount of $139,875.39, which is equivalent to 9,573,238

Indian Rupees, determined at the official Reserve Bank of India spot exchange rate (68.45 Indian Rupeesto-1.00 US Dollar) applied as of the date that expropriation by the Foreign Governing Authority 

commenced. This amount has been verified by statements of account submitted with the claim 

application (Ex. Pages 348-378). 

42. The amount requested for compensation must be adjusted for the self-insured retention requirement 

under Section 1.03 of the Master Insurance Contract, “The Investor shall continue to bear the risk of loss 

of at least 10% of the book value of the Investor’s Interest in the Foreign Enterprise and shall bear at least 

10% of the lost business income compensable under Article VI hereof, each on a per claim basis.” 

Application of the self-insured retention requirement against the Investors’ requested compensation 

amount results in a compensation amount of $125,871.65 payable by DFC. 

43. The statements of account did not require any of the adjustments set forth under Section 5.05 of the 

Master Insurance Contract, and the financial statements have been prepared in accordance with GAAP. 

The amounts claimed reflect book value as defined by the Insurance Contract Documents for all 

Maharashtra-related turbines operated by the Foreign Enterprise. 

CONCLUSIONS

44. Based on the analysis presented, above, the Investors are entitled to compensation in the amount of 

$125,871.65, for expropriation of Covered Property by the State of Maharashtra (India) during June 2019 

through September 2019.