Written by Gopal Jain
There is a clear mission and resolve on the part of the government to nurture a “Naya India” and emerge as a “hub” and “safe haven” for investments. Investments, after all, flow to destinations that are trusted. So what does it take to become a trusted destination? A trusted destination is characterised by ease of doing business, a robust and predictable policy regime and respecting/adhering to sanctity of contracts, that is, keeping the commercial deal and bargain intact. All this and more requires an effective mechanism to address any disputes that come with doing business.
In most commercial contracts, dispute redressal is by arbitration and big ticket deals provide for institutional arbitration. The major global institutions such as the Singapore International Arbitration Centre (SIAC), the London Court of International Arbitration (LCIA) and the ICC International Centre for ADR offer a perfect platform for arbitration.
India too wants to be a “hub” for international arbitration. The amendments to the Arbitration and Conciliation Act reflect this vision and endeavour, and the legislature has taken proactive steps to make arbitration time-bound, disciplined and result oriented. The government too has given this a goal of emerging as a hub for arbitration the stature of a national priority. Judicial support is also vital for an arbitration to reach its logical conclusion and the courts have taken the lead in enforcing foreign awards — the approach being one of minimum interference and maximum deference. Courts have shown restraint in enforcing orders passed by internationally recognised arbitral institutions and have adopted a conservative approach in refusing to enforce foreign arbitration. Even in the case of findings by emergency arbitrators, they seldom interfere or take a contrary view. This has been a big step forward in making arbitration easy, efficient, time-bound and hassle-free, in line with global practices.
To be seen as a trusted and reliable destination for investments requires giving due regard to principles of reciprocity and comity. Global transactions cut across jurisdictions, involve multinational companies and the deal could span across countries and borders. Even disputes can be multi jurisdictional — the issues of the case could be in one country, the case could be decided and judgment pronounced in another, which is then followed by enforcement actions. Arbitral process requires support from reciprocating countries and from national courts. The time has come for India to build its reputation and project an image that it maintains consistency in its laws and is committed to the principle of comity of nations. This will help India hold the flag as a “safe haven” for global investment and capital flows.
Enforcement of contracts has been a pain point and a major obstacle for India, and has also affected the country’s efforts in climbing up the World Bank’s Ease of Doing Business Rankings. India currently ranks at an unimpressive 163 out of 190 on contract enforcement and this remains a cause for concern amongst global stakeholders.
Treating contracts as sacrosanct and abiding by the pre-agreed terms will be in line with the commercial best practices and will go a long way in instilling investor confidence and building India’s image as an easy destination to do business. Recognition and enforcement of awards is one of the most crucial aspects for parties and requires a no nonsense approach and due support from domestic courts. Just like a winner at the end of a long, gruelling and exhausting marathon race is conferred a trophy, the winning party to an arbitration must be given the touch and feel of the fruits of victory.
A strong commitment to good governance principles coupled with accountability and strong internal controls, checks and balances is also essential to emerge as an attractive business destination — it positively impacts performance and long-term viability of businesses and helps establish their home country as a preferred investment destination. Singapore, South Korea and Australia are good examples and they have been able to raise large amounts of capital from foreign parties by ensuring good governance practices.
Investment requires long-term predictability, a commercial environment and placing sanctity and integrity of contracts at the highest pedestal. The mindset has to be one of compliance, adherence and abidance to the decision of the forum chosen by the parties. It is critical to follow the contract and honour the agreed terms rather than finding ways to bypass or defeat it. Parties must act with utmost responsibility and the challenge must be in a manner known or provided by law. This will send out a strong message and ensure commercial and contractual discipline, making India a lucrative destination for investments and strategic partnerships.
Each stakeholder has a crucial role in taking the India story forward and each one must play its part in building India’s reputation as having an investor friendly jurisdiction driven by the rule of law with international standards and high integrity.
The writer is a senior advocate at the Supreme Court of India