In 2013, Kleros Capital Partners approached Tata Power Company with an intriguing proposal: jointly bid for a Russian coal deposit estimated to contain reserves worth $1.1 billion. The two companies signed a non-disclosure agreement (NDA) effective for four years from September 2013, and initial discussions seemed promising.
But by 2015, the relationship had begun to sour. The core issue? Disagreements over who would lead the bid and the ownership structure of the proposed project. Kleros sought an equity stake between 26% and 60%, while Tata Power was only prepared to offer up to 10%. These governance disagreements weren't just minor squabbles—they were fundamental differences that neither party could resolve. By March 2016, a final meeting between the parties effectively ended the collaboration.
The breakdown in governance had immediate consequences. Kleros opted not to participate in Russian federal auctions held in December 2017 and subsequently wound down its operations in the country. The partnership that was supposed to unlock a $1.1 billion opportunity had collapsed before it could even begin.
Here's where things get interesting. After the NDA expired on September 15, 2017, Tata Power, through its Russian subsidiary Far Eastern Natural Resources LLC (FENR), submitted a bid for the mining licence. FENR won the licence in January 2018 for a 25-year term, paying $4.7 million for what was described as high-quality thermal coal reserves of 380 million tonnes.
On paper, this looked like a strategic masterstroke—wait for the NDA to expire, then bid independently. But the timing strategy would prove disastrous. The NDAs contained specific non-circumvention clauses prohibiting Tata Power from making agreements or investments to exploit confidential information, or entering into transactions that would circumvent Kleros' economic interests.
Kleros didn't see this as clever timing—they saw it as bad faith. In November 2020, Kleros commenced arbitration proceedings, alleging that Tata Power had breached the NDAs by misusing confidential information and acting in bad faith to exclude them from the project.
The arbitration tribunal, comprising Professor Lawrence Boo (presiding), Mr Stuart Isaacs KC, and Mr Amal K. Ganguli, delivered a unanimous verdict on September 26, 2023. They found that Tata Power had breached the agreements and its duties of good faith and confidence by misusing confidential information, deliberately circumventing Kleros, making misleading statements, and concealing material facts to pursue the Krutogorovo project for its own benefit.
On July 1, 2025, the tribunal issued its damages award. All three arbitrators agreed that Tata Power had to pay—they differed only on the calculation method. The majority awarded Kleros $490.32 million plus simple interest of 5.33% per annum from November 30, 2020 until payment (approximately $71,600 per day). The tribunal also ordered Tata Power to pay Kleros' legal costs of SGD 8.29 million, plus additional arbitration costs of approximately SGD 3 million.
The damages calculation was particularly stinging. The tribunal valued the project at around $1.02 billion and assessed Kleros' loss of chance at 60%—meaning Kleros was awarded damages based on the opportunity they had lost due to Tata Power's actions.
Adding irony to injury, Tata Power's Russian coal venture never materialized. After winning the mining licence, the company conducted detailed exploration and planning. But by 2021, Tata Power had determined the project was not commercially viable. In a telling move, they even offered the mining licence back to Kleros at the same price they had paid for it—$4.7 million. Kleros rejected the offer.
On January 28, 2022, FENR submitted a request to the Russian federal government to surrender the licence without having utilised it. The Russian government accepted the surrender request on April 25, 2022. The project that had cost Tata Power $490.32 million in arbitration damages had generated zero revenue and zero operational value.
The surrender decision reveals significant weaknesses in Tata Power's asset viability assessment processes. The company had won the licence based on initial estimates of 380 million tonnes of high-quality thermal coal, with plans to mine 8-10 million tonnes per annum for use in its Mundra and Trombay power plants and for export to Far East Asian markets. Yet within four years, they concluded the project was unviable and abandoned it entirely.
The company's current cash balance stands at ₹4,410 crores—meaning the total liability exceeds its entire cash reserves by approximately ₹958 crores. AnnualReports
The award will consume nearly 89% of Tata Power's FY26 operating cash flow of ₹5,993 crores and is equivalent to approximately 3.8 years of Q1 FY27 net profit (₹1,401 crores). This comes at a particularly challenging time, as Tata Power has outlined ambitious capital expenditure plans of ₹1.25 trillion for FY26-30, with 65% directed towards clean energy initiatives. AnnualReports
The company's high debt-to-equity ratio of 1.85 and current ratio of 0.66 indicate existing leverage and liquidity pressures that will be exacerbated by this award. The ability to fund planned renewable energy expansion—targeting 30 GW total capacity by FY30 with 20 GW from clean sources—will be substantially constrained unless alternative funding sources are identified or the award is successfully appealed. AnnualReports
Tata Power challenged the arbitral award before the Singapore International Commercial Court (SICC), disputing both the quantum of damages and the validity of the majority decision. The company argued that the tribunal had breached principles of natural justice and failed to determine essential issues.
On August 26, 2026, the SICC delivered its judgment, comprehensively rejecting all of Tata Power's challenges. The court held that the majority did not breach natural justice or the fair hearing rule in arriving at the final award, found no basis for claims of apparent bias against tribunal members, and upheld the tribunal's calculation methodology and the $490.32 million damages award.
The court also ordered Tata Power to pay Kleros' legal costs, with the amount yet to be determined. Tata Power has indicated it will appeal to the Singapore Court of Appeal within the 28-day period from August 26, but the SICC's dismissal represents a significant setback to the company's legal challenge over the long-running dispute.
The failed Russian coal asset partnership with Kleros Capital Partners exposes critical gaps in Tata Power's risk management framework for international resource acquisitions. While the company operates sophisticated enterprise risk management processes with board-level oversight, automated risk monitoring systems, and comprehensive financial risk management practices, these frameworks failed to adequately address the unique challenges of international joint ventures. AnnualReports
The experience reveals several specific weaknesses: insufficient evaluation of partnership governance requirements, inadequate assessment of partner compatibility and expectations, limited attention to non-circumvention clause implications, and insufficient consideration of arbitration risks and costs. The asset viability assessment process also showed gaps, with over-reliance on initial partner-provided information, insufficient independent technical validation, and underestimation of infrastructure and logistical challenges. AnnualReports
The governance disagreements that caused the 2015 relationship breakdown—specifically the dispute over leadership (who would lead the bid) and ownership structure (Kleros seeking 26-60% equity vs. Tata Power offering maximum 10%)—were fundamental issues that should have been addressed through more robust partnership due diligence and governance structure planning before signing the NDAs.
This case serves as a cautionary tale for companies pursuing international joint ventures and cross-border resource investments.
For Tata Power, the immediate challenge is managing the financial impact while pursuing its ambitious clean energy transition plans. The company targets 70% of its capacity to be renewable by 2030, with revenue aspirations of ₹1 lakh crore and profit after tax projected to reach ₹10,000 crore by FY30. The arbitration award will significantly constrain the capital allocation needed to achieve these targets.
The broader lesson is clear: in international partnerships, getting the governance structure right is as important as getting the commercial terms right. And sometimes, the cost of what you don't do—like properly structuring a partnership or honoring confidentiality obligations—far exceeds the cost of what you do.
