India Plans New Regulations for Foreign Investors

As per an exclusive report by Reuters, India is likely to start implementing a new law that can speed-up trial on foreign investors related issues. Two Indian officials who refused to reveal their names told Reuters, the main aim of the new regulation was to attract more foreign investment in the country which would boost domestic economic growth.

For Easy Access of Foreign Investment

According to one official, India’s finance ministry has drafted a 40-pages for the initial plan for the proposed new regulations of the foreign investment. The draft mentioned about setting up special courts for the speedy trial on the existing disputes between investors and the government.

The official explained, “The idea is to attract and promote foreign investment, but a major issue for investors is the enforcement of contracts and speedy dispute resolution.” However, the finance ministry and its officials declined to comment on this matter.

According to the report, in December 2019, India’s finance ministry held several meetings with other ministries which included officials from the ministries of commerce, external affairs, and law, as well as the banking and stock market regulators to discuss the new regulations. In the meetings, a proposal was put forward about setting up a separate investment tribunal in the state high courts for addressing the investors’ related matters. However, it is not yet clear about when the new regulations would be finalized.

Existing Hindrances towards Foreign Investment

India has a bad reputation regarding the access of foreign investors and delaying in solving business-related disputes between the government and investors. Despite India’s ranking improved in World Bank’s report of the easy access of business to 63 from 142 in 2014, it has ranked 163 out of 190 in terms of business contract enforcement. Over the years, several foreign investors pointed out the failure of contract enforcement in India and the red tape proceeding of the existing legal system had been their major challenges.

India is facing hardship as foreign investors lack trust around its commitment to the sanctity of agreements because many of the approved projects have been canceled by the state governments and became the contract lapse. Moreover, India had already entered bilateral investment treaties (BITs) that provide foreign investors protections with dozens of nations. Under the BITs, investors can put forward the disputed matters to and seek legal assistance from the international arbitration courts.

India has presently more than 20 such overseas arbitration cases initiated from various companies including Vodafone, Deutsche Telekom and Nissan Motor Co. regarding several disputes over retrospective tax claims and breach of contracts. A source said, India’s domestic law cannot substitute BIT and India’s attempt to sign investment treaties under the new law without BITs supervision would not encourage foreign investors.

I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.

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