Nissan is a relatively new brand in India where it produces the Terrano SUV, Micra hatchback and Sunny sedan. In 2008, Nissan and Renault agreed to jointly set up a car manufacturing facility in Chennai, the capital of the state of Tamil Nadu. At the time the state government had promised various tax incentives including some tax refunds.
In a period of seven years, the combined investment from both brands has crossed US$946mn . The Chennai manufacturing plant has an annual production capacity of 4,80,000 vehicles, which entitled them to receive the incentives in 2015. Despite corporate representations to the local government no action has been taken and this has clearly upset global operator Nissan.
With no solution in sight, Nissan has begun international arbitration against the Indian Government seeking over US$770mn in a dispute over unpaid state incentives. The company’s chairman Carlos Ghosn, had also sent a legal notice to the Prime Minister of India in July 2016 seeking for the payment of incentives due from the Tamil Nadu government but there has been no response from the Prime Minister’s office as well in spite of several meetings between the federal and state officers and Nissan officials.
Officials from Nissan were assured that the payment would be made provided the company did not bring a legal case. However, as there were no actions from the Government, the Japanese automaker gave India an ultimatum to appoint an arbitrator and that the first arbitration hearing will be held in mid-December. The case has now been brought against India for violation of its Comprehensive Economic Partnership Agreement with Japan.
Nissan claims that it has incurred significant and increasing losses and in its notice is claiming unpaid incentives and damages besides interest and other costs.