India ready to host International Arbitration?

The Chennai High Court by a recent decision has held that the need to make India as a preferred seat for International Commercial Arbitration would benefit the economy of the country and that if foreign law firms or lawyers are not allowed to take part in arbitrations, it will have a counter productive effect on the aim of the Government to make India a hub of International Arbitration. But does the decision by itself promote international arbitrations. What are the pros and cons of making India the venue of International arbitration? IIAM is conducting a master conference to address the issues.

A recent judgment of the Chennai High Court has clarified the Indian legal provisions relating to the scope of foreign lawyers in practicing international arbitration in India. The Court held that having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.

International arbitration is growing big time in India and in almost all the countries across the globe. India is a signatory to the World Trade Agreement, which has opened up the gates for many international business establishments based in different parts of the world to come and set up their respective businesses in India. Large number of Indian Companies have been reaching out to foreign destinations by mergers, acquisition or direct investments. As per the data released by the Reserve Bank of India during 2009, the total out ward investment fromIndia excluding that which was made by Banks, had increased 29.6% to U.S. Dollar 17.4 billion in 2007-08 and India is ranked third in global foreign direct investment. Overseas investments in joint ventures and wholly owned subsidiaries have been recognized as important avenues by Indian Entrepreneurs in terms of foreign exchange earning like dividend, loyalty, etc. India is the 7th largest, the second most populated country and the fourth largest economy in the world. Various economic reforms brought about have made India grow rapidly in the Asia-Pacific Region, and the Indian Private Sector has offered considerable scope for foreign direct investment, joint-venture and collaborations.
Therefore, when there is liberalization of economic policies, throwing the doors open to foreign investments, it cannot be denied that disputes and differences are bound to arise in such International contracts. When one of the contracting party is a foreign entity and there is a binding arbitration agreement between the parties and India is chosen as the seat of arbitration, it is but natural that the foreign contracting party would seek the assistance of their own solicitors or lawyers to advice them on the impact of the laws of their country on the said contract, and they may accompany their clients to visit India for the purpose of the Arbitration. Therefore, if a party to an International Commercial Arbitration engages a foreign lawyer and if such lawyers come to India to advice their clients on the foreign law, there could be no prohibition for such foreign lawyers to advise their clients on foreign law in India in the course of a International Commercial transaction or an International Commercial Arbitration or matters akin thereto.

The arbitration law in India is modeled on the lines of the UNCITRAL Model Law of Arbitration and makes a few departures from the principles enshrined therein. The Arbitration and Conciliation Act 1996, provides for international commercial arbitration where at least one of the parties is not an Indian National or Body corporate incorporated in India or a foreign Government. In the recent past, parties conducting International Commercial Arbitrations have chosen India as their destination.

These factors have weighed in the decision making process of the Court, The Court has observed, “to advocate a proposition that foreign lawyers or foreign law firms cannot come into India to advice their clients on foreign law would be a far fetched and dangerous proposition and in our opinion, would be to take a step backward, when India is becoming a preferred seat for arbitration in International Commercial Arbitrations. It cannot be denied that we have a comprehensive and progressive legal frame work to support International Arbitration and the 1996 Act, provides for maximum judicial support of arbitration and minimal intervention.” The Court found that the need to make India as a preferred seat for International Commercial Arbitration would benefit the economy of the country and that if foreign law firms are not allowed to take part in negotiations, for settling up documents and conduct arbitrations in India, it will have a counter productive effect on the aim of the Government to make India a hub of International Arbitration and against the national interest.

But the real question is, just by clearing the ambiguity of the legal position of foreign lawyers’ entry to conduct arbitrations in India and giving them a green signal will make India a hub of International Arbitrations? Are the ground realities favorable? What are the advantages and disadvantages of choosing India as a venue for international arbitrations?

The Indian Institute of Arbitration & Mediation (IIAM) is trying to find out the views and opinions of the various players in the field. IIAM is conducting a 2-day International Master Conference, titled, “New Frontiers in Dispute Management & Resolution in the Globalized World” on 31st May and 1st June 2012 at Bangalore, India.

Indian Institute Of Arbitration and Mediation: IIAM

IIAM is dedicated to promote the amicable and fair settlement of disputes. It aims to create an environment in which people can work together to find enduring solutions to conflicts and tensions. IIAM provides a triple level solution for total management of disputes.