Nayara Energy vs. Microsoft Corporation: Lessons For India On Digital Sovereignty

In its effort to further pressurize the Russian Federation and establish peace in Ukraine by making the war costlier for the Russian government, the European Union adopted the 18^th package of sanctions against Russia last month on July 18, 2025. Like the previous packages of sanctions, this one also had no substantial impact on the ongoing war.

However, this package was exceptional for India as it not only sanctioned an Indian entity, but also showed a glimpse of how vulnerable Indian companies are should the western tech giants choose to terminate their services in compliance with a unilateral sanction by the United States or the European Union.

This incident, or rather this adverse situation, was neutralised as soon as the affected party petitioned before the Hon’ble High Court of Delhi. Nonetheless, this should be a wake-up call for a country which itself is a leader in the export of Information Technology (IT) services and churns out the second largest number of STEM graduates annually, among all countries.

Sanctioning of Nayara Energy Limited by the European Union

The European Union via Council Implementing Regulation (EU) 2025/1476 found 55 entities, including 14 individuals, to be “responsible for actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine”. The names of these entities were added to Regulation (EU) No 269/2014, which was originally adopted in response to the annexation of Crimea by the Russian Federation in 2014.

Nayara Energy Limited, a public company having its registered address at Jamnagar, Gujarat, India was one of the entities targeted by the EU for “providing a substantial source of revenue to the Government of the Russian Federation”. The company condemned this action and termed the decision as unjust and unilateral and emphasised that its mission was ‘in India, for India’ by issuing a media statement on its website. Rosneft, a Russian oil company which owns a 49.13% share in Nayara Energy and was the prime reason behind this EU sanction, also condemned this action and referred to it as an example of “extraterritorial implementation of politically motivated restrictions that blatantly violate international law”. As per its press release, Rosneft is not a controlling shareholder of Nayara Energy.

The legality of this sanction on Nayara Energy by the European Union is highly debatable since the Russian oil has not been sanctioned per se, only the price cap for it has been fixed by the G7 and its allies to keep the global energy markets stable. Also, unlike the collective West, the Republic of India has not put sanctions upon the Russian Federation and thus the scope within which Nayara Energy was operating was legally permissible.

On July 22, in compliance with these sanctions, Microsoft Corporation stopped providing its services to Nayara Energy.

Nayara Energy Ltd. v. Microsoft Corporation India Pvt. Ltd.

Microsoft Corporation, a near hegemon in Operating Systems (OS) industry having a market capitalization of over 4 trillion US Dollar (₹349 trillion) as of August 2025, is a major provider of IT services to corporate offices in India. In compliance with the EU sanctions, on July 22, Microsoft stopped providing its services to Nayara Energy. Several digital services like Outlook, Microsoft Teams, Office, cloud storage etc. which are critical for business operations suddenly became inaccessible to India's second largest oil refinery. Nayara Energy lost access to its own data which were saved on Microsoft’s servers. This was a major disruption for the company, which was unprepared for such a scenario.

Consequently, Nayara Energy petitioned before the High Court of Delhi alleging that the unilateral termination of services by Microsoft was immensely prejudiced and prayed for an interim direction of restoration of the services under Microsoft Business and Service Agreement. It is noteworthy that the single judge bench of Justice Purushaindra Kumar Kaurav acted swiftly and listed the matter for the next hearing just two days after the initial hearing while issuing notice to the respondent company.

However, Microsoft restored its services before the next hearing. Thus, the court, by an order dated July 30, 2025, allowed the petitioner to withdraw the petition and disposed of the matter. Later, by another order dated August 6, 2025, it allowed the petitioner to make a representation to the respondents in case of any grievances. With this, the ‘Nayara Energy v. Microsoft Corporation’ litigation came to an end.

This episode was a rare glimpse of the fragility of the globalised and interconnected world we live in. It shows how the whims of the powerful western governments and institutions can upend the services we have become so dependent upon. In a world which is increasingly becoming marred with sanctions and spurt of trade barriers, it is important that India works towards strengthening its digital sovereignty.

Are global tech platforms truly global in providing services?

The rules-based world order that took form after the second world war has essentially been a West-led world order through which the western countries have benefited the most. Rapid globalisation, followed by the advent of the internet era and the dot com boom of the early 2000s paved the way for a more interconnected world which gave the developed countries a commercial and technological edge over rest of the world. Many tech companies emerged during this period and adoption of their services became a symbol of advancement.

Unsurprisingly, most of these companies were based in the United States of America which provided them the best environment to grow along with a strong financial background. Microsoft was also one of them. Tech companies based in other parts of the world have also achieved some successes, but the ones based in the USA continued to dominate markets, which made it difficult for new entrants to survive. The services of these companies were so widely available that individuals and corporations all over the world found availing them very convenient. These services didn’t only make their business operations faster, but also reduced costs with an increased efficiency. Within a few years only these companies dominated their respective markets everywhere in the world and thus became ‘global’.

Importance of these global platforms was remarkably felt during the Covid-19 lockdowns of 2020-21 when social distancing had become the new normal. These platforms are such integral parts of our daily life that we operate under an unconscious assumption that they will always be available to us as long as we are connected to the internet. But companies, no matter how big and dominant, are also subject to laws and regulations by the governments. They have to comply with directions and requests by the governments and even adhere to their foreign policies in order to keep their businesses running. This comes as an impediment and becomes a limitation to their “global” status.

When the American government essentially renamed the Gulf of Mexico as “Gulf of America” via an executive order, Google Maps was among the first web mapping services to show the label “Gulf of America” on its maps. Although this executive order was only meant for the American federal agencies and has no relevance outside America, the display of a new label over the map of the Gulf of Mexico shows that Google has to abide by the whims of the American government despite being “global” and act in consonance with the American foreign policy. The United Nations and the International Hydrographic Organization continue to recognize the water body by the name of Gulf of Mexico.

Similarly, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a cooperative society which provides a messaging network for international payments, has been used as a tool for sanctions against some countries and financial institutions by the collective West. SWIFT is headquartered in Belgium, Europe and currently connects over 11,000 banks all over the world. In 2012, as a result of EU sanctions on Iran, the Iranian banks were disconnected from SWIFT which caused a major disruption and isolation of the Iranian economy.

Banks of Russia and Belarus have also been disconnected by the SWIFT in accordance with the US and EU sanctions over them in response to the invasion of Ukraine by Russia and Belarus’s assistance to Russia for the same. However, Russia was able to mitigate the impact because of the System for Transfer of Financial Messages (abbreviated SPFS) developed by its central bank as an alternative to SWIFT.

Taking lessons from these instances, India may also need to develop its own messaging networks of international payments. Especially when the USA and the EU have already imposed unilateral sanctions on some Indian entities for doing business with Russia.

Scanning the horizon of digital sovereignty in India

From the social media platforms like Facebook, Instagram, LinkedIn etc. to payment networks like Visa, Mastercard and even operating systems like Windows and Android, almost all the popular digital services in India are of foreign origin and headquartered in a country with whom India’s bilateral relations have deteriorated recently. Most of these services have India as the largest or second largest user base. In case the concerned country decides to tighten its restrictive measures on India by widening the scope of unilateral sanctions, the overall impact on the Indian economy due to stoppage of digital services could be fatal.

The Government of India has successfully developed its own payment network RuPay which is currently the largest payment network in the world in terms of the number of transactions it carries out during a given timeframe. Similarly, the United Payment Interface (UPI) has been a phenomenal success and stands as a testimony of the capability of Indian innovation in Public Digital Infrastructure. Also, the Aadhaar based authentication, Digilocker, Prasar Bharati’s streaming platform Waves, Zoho, Koo, Hanooman and CtrlS Datacenters are some of the examples of how India can build its own platforms and de-risk from western sanctions.

While digital sovereignty is still a far-fetched idea, it is not unachievable for a country like India which is the fastest growing major economy and accounts for one-fifth of the global GDP growth. Where laws for digital data protection, data localization, regulations for digital platforms have already been made, what India needs now are its own homegrown operating systems, AI models, cloud services and semiconductor chips among other things for becoming Aatmanirbhar in true sense. This was also said by the Prime Minister Narendra Modi in his Independence Day speech of 2025 where he emphasised on self-reliance in every aspect including social media and artificial intelligence.

The union government already realises this position and has commissioned and supported the development of indigenous IT platforms, but the foreign services continue to dominate the market. It is also notable how hundreds of startups are focused on developing new apps and platforms despite a severe competition from already existing ones. Adoption of their platforms by consumers is also vital for this endeavour. This is truly in the spirit of the ‘Make in India’ initiative.

Digital sovereignty is possible only by unified efforts of all stakeholders where the government provides encouraging incentives to institutions and entrepreneurs who then create reliable and mutually compatible digital services that can be adopted by companies like Nayara Energy, so that no foreign sanction is too big to contain. It further strengthens our position of strategic autonomy in the new multi-polar world. Nothing is unachievable if 145 crore Indians decide to achieve it together. Incredible India of the twenty-first century is, afterall, inevitable as well.