A recent corporate dispute that has captured headlines is the Amazon-Reliance-Future battle. Although much ink has been spilt on the concoction of legal issues arising from the dispute such as the validity of emergency arbitral awards, rights of minority shareholders and debt structuring, the theme that seems to dominate proceedings before all regulators and courts in India is the “foreign-ness” of Amazon. While indeed some issues such as FDI in multi-brand retail will turn on the country of incorporation of a party, in this case, there seems to be a risk that the foreign identity of the company might overshadow all relevant legal assessment. Perhaps, the most striking presage of this was the counsel for Future Retail accusing Amazon of behaving like “the East India Company of the 21st century” and calling it “Big Brother in America.”
This is not an isolated incident of a company’s foreign identity being used to build a narrative that doesn’t necessarily pertain to the legal issue at hand. While Indian digital payment apps have already been launched, WhatsApp Pay is still stuck before the Supreme Court even though it claims to have obtained all requisite approvals. Multiple petitions have been filed against WhatsApp Pay claiming that permitting foreign entities to launch payment apps would endanger the country’s financial data. This is despite the National Payments Corporation of India’s approval of WhatsApp’s data localisation practices. While politics in India is no stranger to emotive appeals to the nationalistic sentiment of its masses, such instances make it clear that its corporate sector (and tribunals) might not be immune from a nationalistic argument either.
The last few months have also seen an outcry by several Indian apps regarding the “gatekeeper” status of foreign app-stores and their ability to arbitrarily remove apps. While this competition issue has attracted attention globally, in India app developers have complained not merely about a competition violation but also a systemic affront to the financial ecosystem of the country and have criticised app-store policies for being “over and above the laws of our country.” The founder of Paytm has called Google a “money collecting and money siphoning” machinery and argued that “Indian businesses cannot be taken to ransom by American powers…” Frequent references to Google (and in fact, all of the “big five”) as the East India Company, attempt to monetise the country’s past by evoking sentiments of exploitation by a foreign power. Sentiments of corporate nationalism become even more pronounced when it comes to Chinese companies. By mandating prior approval for Chinese FDI, banning several Chinese apps and restricting Chinese bidders from participating in public procurement contracts, the Indian government has in the span of the last few months alone imposed severe restrictions on Chinese investments.
Indeed, a sovereign is well within its rights to encourage economic self-reliance and promote domestic businesses, especially in a pandemic — Atmanirbhar Bharat and Make in India campaigns being prime examples of such an exercise of sovereign power. However, the rise in corporate nationalism in India, especially when advocated by private players, is not, at its heart, steeped in ideals of domestic self-reliance or sharing the fruits of capital locally. Paradoxically, foreign investors hold majority stakes in most of these “Indian” startups which make impassioned complaints of losing market share to foreign companies. While painting Amazon as a foreign tyrant, Reliance, too, doesn’t shy away from receiving investments from Google. The problem, though, goes beyond the apparent hypocrisy of such a stance.
By projecting core legal disputes as issues contingent on the foreign identity of corporate players, domestic companies recharacterise the regulatory landscape in a way which reduces enforcement risk for them. While foreign companies risk being caught in the crossfire due to their “foreign-ness”, Indian entities in violation of laws escape enforcement because of their status as “domestic champions”. Such an approach impoverishes and dangerously alters legal jurisprudence by placing the foreign identity of a party at the centre of regulatory assessments, ultimately subverting the objective of commercial laws. These practices also paint a rather abysmal picture for foreign investors and cause uncertainty in an already chaotic legal environment, increasing the risk associated with doing business in India.
There is no doubt that the practices of many foreign companies are suspect. But by shifting the focus to their “foreign-ness” we lose sight that such conduct is per se problematic. With its own league of domestic conglomerates spanning across industries, with equally deep pockets (and more political sway) than their foreign counterparts, and a questionable track record of regulatory compliance, India(ns) needs to be protected from its domestic corporate giants as much as any foreign company. This can be guaranteed only if regulators and courts consciously separate legally relevant submissions from nationalistic rhetoric and stay true to the statutorily mandated objectives of their respective regimes.
This article first appeared in the print edition on December 16, 2020 under the title ‘The foreign hand business again’. Singh and Khemka are Delhi-based lawyers