Why Nayara Energy has taken SAP India to court
What's the story
Nayara Energy has filed a lawsuit against SAP India in the Delhi High Court. The legal action comes after SAP suspended critical software services for Nayara, citing European Union (EU) sanctions. The case is set to be heard next week, on March 16. This dispute highlights the impact of foreign laws on Indian operations and energy security.
Contractual dispute
Legal battle
Nayara Energy contends that its contract is with SAP India, an Indian company, and not subject to foreign sanctions. However, SAP India argues that it cannot provide services without support from its parent company based in Germany. This has been termed as an "extraterritorial application of law" threatening Indian energy security since they contribute significantly to India's petroleum production.
Legal proceedings
Nayara's petition in High Court
Nayara Energy's petition in the High Court describes SAP's action as a "sudden, unilateral and illegal suspension of support services." The company argues that the suspension is based on sanctions imposed by a foreign jurisdiction (the EU), which have no legal effect in India. Nayara also highlights that SAP's software has been fully integrated and customized to its operations over 18 years, making it impossible for them to switch to alternatives.
Legal relief
Legal action sought by Nayara
Nayara Energy has sought a permanent injunction against SAP's service suspension and specific performance by the company. The legal action comes as Nayara operates India's second-largest single-site refinery with a capacity of 20 million tons per year. It also runs an extensive retail fuel network of around 7,000 petrol pumps across the country.
Operational impact
SAP's software services
SAP ERP Central Component, a system supporting key modules such as finance and accounting, material management, supply and distribution among others, was tailored for Nayara's industry-specific functionalities. The petition states that SAP has become the backbone for supply chain management and tax compliance. An email communication from SAP on September 2 last year, announced the suspension of services to comply with certain EU sanctions.