The article highlights the lack of immediate compliance by the Indian government in awards involving foreign investors.

Why honouring award is important

• An important factor that propels investors to invest in foreign lands is that the host state will honour contracts and enforce awards even when it loses.
• But when the host state refuses to do so, it shakes investors’ confidence in the host state’s credibility towards the rule of law, and escalates the regulatory risk enormously.
• To an extent, this has been India’s story over the last few years
• Last year, India lost two high-profile bilateral investment treaty (BIT) disputes to two leading global corporations — Vodafone and Cairn Energy — on retrospective taxation.
•  India has challenged both the awards at the courts of the seat of arbitration.
• As India drags its feet on the issue of compliance, it harms India’s reputation in dealing with foreign investors.

Antrix-Devas agreement cancellation dispute

• The other set of high-profile BIT disputes involve the cancellation of an agreement between Antrix, a commercial arm of the Indian Space Research Organisation, and Devas Multimedia.
• This annulment led to three legal disputes — a commercial arbitration between Antrix and Devas Multimedia at the International Chambers of Commerce (ICC), and two BIT arbitrations brought by the Mauritius investors and German investors.
• India lost all three disputes. 
• The ICC arbitration tribunal ordered Antrix to pay $1.2 billion to Devas after a U.S. court confirmed the award earlier this year.
• After the ICC award, Indian agencies started investigating Devas accusing it of corruption and fraud.
• Last month, the National Company Law Tribunal (NCLT) ordered the liquidation of Devas on the ground that the affairs of the company were being carried on fraudulently.
• This has led to Devas issuing a notice of intention to initiate a new BIT arbitration against India, sowing the seeds for complex legal battles again.

Implications for investment in India

• A closer reading of these cases reveals that whenever India loses a case to a foreign investor, immediate compliance rarely happens.
• Instead, efforts are made to delay the compliance as much as possible.
• While these efforts may be legal, it sends out a deleterious message to foreign investors.
• It shows a recalcitrant attitude towards adverse judicial rulings.
• This may not help India in attracting global corporations to its shores to ‘make for the world’.

Consider the question “What are the factors that are leading to more Indian business disputes being settled elsewhere? What are the implications of delay by the government in honouring the awards of the disputes?” 

Conclusion

As India aspire to be the global destination of FDI, it needs to burnish its image on the dispute resolution front by honouring the awards.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now