Source: https://www.azbpartners.com/bank/investor-state-arbitration-2019-india/
Timestamp: 2019-04-20 04:34:24+00:00

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India has signed and ratified trade agreements with several countries such as Korea, Singapore, Japan and Malaysia. Additionally, India is a signatory to several tax treaties as well as intergovernmental agreements such as the General Agreement on Trade-in Services (“GATS”). India has also signed framework agreements with the Association of South East-Asian Nations (“ASEAN”), Mercado Común Sudamericano (“MERCOSUR”) and the European Union (“EU”).
a) The Model BIT seeks to narrowly define “investment” by adopting a hybrid asset/ enterprise-based definition. An enterprise has been defined to mean any legal entity constituted in compliance with the laws of the Host State and having its real and substantial business operations in the territory of the Host State. For the purpose of the definition of an enterprise, “real and substantial business operations” are required to satisfy certain cumulative criteria, such as, the enterprise must: (i) be a commitment of capital or other resources; (ii) for a certain duration; (iii) for expectation of profit or gain; (iv) involve the assumption of risk; and (v) be of significance for the development of the Host State”.
b) The definition of investor includes both natural and juridical persons who own or control an investment in the Host State.
c) The Model BIT does not include a Most Favoured Nation obligation or a broad Fair and Equitable Treatment obligation. Instead, the Model BIT provides for a defined scope of Standard of Treatment. The 2015 Model BIT however, does accord full protection and security to the investor and its investment and also extends National Treatment to investors.
d) Notably, the Model BIT requires an investor to exhaust local remedies before initiating arbitration proceedings.
2.1 Is your country a party to (1) the New York Convention, (2) the Washington Convention and/or (3) the Mauritius Convention?
India is party to the United Nations Convention on the Recognition and Enforcement of Foreign Awards, 1958 (“New York Convention”). India is not however, a signatory to either the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“the Washington Convention”) or the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (“the Mauritius Convention”).
2. by the Government route which requires prior approval from the concerned Ministries/ Departments through a single window: The Foreign Investment Facilitation Portal (“FIFP”). The FIFP is administered by the DIPP, Ministry of Commerce and Industry and the Government of India.
3.2 Has your country indicated its policy with regards to investor-state arbitration?
As of 2018, India has discontinued several BITs with most of its trading partners and has issued termination notices to about 58 countries, including several EU States. While no other official government clarification is presently available on the subject, several newspaper reports have noted that only a few countries such as Armenia, Belarus, Kyrgyz Republic, Oman, Qatar, Switzerland, Tajikistan, Thailand, Turkmenistan, UAE and Zimbabwe have agreed to renegotiate the treaties after the draft model BIT was approved by the Union Cabinet in December 2015.
As of September 11 2018, a total of 24 treaty arbitrations have been initiated against India [according to publicly available information, including the website of the United Nations Conference on Trade and Development (“UNCTAD”)]. Currently, 13 claims are pending, nine have been settled, and an award has been passed in two claims. The White Industries award (discussed in question 3.2 above) was decided against India. In what may be termed as India’s first known victory in treaty arbitration – Louis Dreyfus Armateurs SAS v. The Republic of India, India has recently defeated a claim of USD 36 million by Louis Dreyfus (a French investor), under the France-India BIT. This case has not been updated on the UNCTAD website – which still reflects 14 pending cases.
5.1 Does your country allow for the funding of investor state claims?
Third- party funding has not been blessed with specific legislation in India. Although there is no express bar on obtaining third-party funding (“TPF”), TPF agreements will nevertheless be subject to several complications due to the lack of legislative framework to regulate such funding.
The subject of TPF is still at a very nascent stage in India and there is no recent case law that adequately addresses the subject. However, the Supreme Court of India has in Bar Council of India v. A.K. Balaji & Ors. (2018 5 SCC 379) observed that, there appears to be no restriction on third parties’ funding litigation and getting repaid upon the outcome of the litigation.
It must be noted however, that the ICC award was passed in relation to the commercial arbitration proceedings initiated against Antrix. The outcome of the treaty arbitration between Devas and Antrix is still pending.
Where India is the seat of arbitration, the parties’ choice of arbitrators would be subject to Schedules V and VII of the Arbitration Act. On October 23, 2015, India became the first jurisdiction to statutorily adopt the IBA Guidelines on Conflicts of Interest in International Arbitration (“IBA Guidelines”) in Schedules V and VII. Schedule V contains circumstances under the Orange List and Schedule VII contains circumstances under the Red List of the IBA Guidelines. Parties can however, waive the bar on the appointment of an arbitrator (where such arbitrator is squarely covered by the circumstances under Schedule VII) after a dispute has arisen between such parties.
India has not officially recognised all of the signatories to the New York Convention and thus, Indian courts will only enforce foreign awards under the Convention if such awards have been issued in a State that has been notified in the Official Gazette of India, as a country to which the New York Convention applies. At present, only Australia, France, China, Hong Kong, Japan, Singapore, the United Kingdom and the United States have been notified by India in the Official Gazette.
While India became a signatory to the the United Nations Convention on the Jurisdictional Immunities of the States and their Property on January 12, 2007, the same has not yet been brought into force. It is however, indicative of India’s inclination to more formally adopt the “qualified” immunity approach, which has, in any case, been adopted by Indian courts. In Ethiopian Airlines v. Ganesh Narain Saboo (“Ethiopian Airlines”) (2011 8 SCC 539), the Supreme Court held that Ethiopian Airlines was not entitled to sovereign immunity with respect to a commercial transaction, which was in consonance with the growing body of international law principles.
In Qatar Airways v. Shapoorji Pallonji (2013 2 BomCR 65), the Bombay High Court placed reliance upon the decision of the Supreme Court in Andhra Pradesh State Road Transport Corporation v. Income-tax Officer (AIR 1964 SC 1486), to hold that in dealing with corporations established by a State, the corporation, though statutory (or not), has a personality of its own and this personality is distinct from that of the State or other shareholders. In this context, the Supreme Court also referred to the observations made in Tamlin v. Hanna (1950 1 K.B. 18) that, “the corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities and privileges of the Crown. Its servants are not civil servants and its property is not that of the crown”.

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