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Tata Loses Appeal Against FLAG

Tata Communications Ltd. is considering another appeal in its ongoing battle with FLAG Telecom Ltd. over access to a submarine cable landing station in India, after the district court of The Hague this week upheld an earlier decision by an arbitration panel in favor of FLAG.

Tata Communications, which incorporates the international connectivity provider formerly known as VSNL, had challenged a 2006 ruling by the International Chamber of Commerce's arbitration tribunal that FLAG Telecom has the right to access the Mumbai cable landing station controlled by Tata. (See VSNL-FLAG Battle Escalates and VSNL Rebrands as Tata Communications.)

FLAG Telecom, part of Global Cloud Xchange , wants access to the landing station so it can upgrade the capacity of the FLAG Europe-Asia (FEA) cable system to capitalize on the growing demand for bandwidth in India. (See Reliance Integrates Global Services.)

But Tata insists that the construction and maintenance agreement between the companies does not require it to grant FLAG access.

FLAG argues that Tata is blocking the upgrade to prevent competition and has requested $400 million in compensation since it has lost business, being unable to expand its network capacity.

In its judgment, the bench of H. Wien, P Joele, and C. H. Van Dijk stated: "Given that none of the arguments advanced by VSNL is accepted by the court, its claims will have to be rejected." Having lost the appeal, Tata will be required to pay €25,936 ($40,800) in legal fees.

Now that the Hague court has ruled, the case will go back to the ICC panel, which will make a final decision on the amount of compensation to award FLAG.

But according to a statement, "Tata Communications is disappointed with the decision of the Hague Court and is considering its options for appeal with its advisers," indicating the wrangling may not be over.

Tata's stock fell by 61.90 Indian Rupees (11.43%) to INR479.45 ($11.98) on the Bombay Stock Exchange Tuesday after news of the ruling, and fell another INR9.60 (2%) to close at INR469.85 ($11.74) on Wednesday.

— Nicole Willing, Reporter, Light Reading

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