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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | January 2016
In the past few years there have been significant developments to the Indian arbitration law, bringing the Indian arbitration regime closer to global standards. These include 1 : the restriction of the Indian court’s jurisdiction over foreign-seated arbitrations through the Supreme Court’s BALCO decision in 2012;2 the restriction of the Indian court’s jurisdiction over foreign-seated arbitrations through the Supreme Court’s BALCO decision in 2012;3 the 2014 Law Commission report4 calling for extensive amendments to Indian arbitration law in light of the problems that “plague the present regime of arbitration in India”;5 and the announcement of the government’s intention to amend and reform the Arbitration and Conciliation Act 1996 (Act) in August 2015.6
Building on these developments, on 23 October 2015 the government promulgated an ordinance – the Arbitration and Conciliation (Amendment) Ordinance 20157 (Ordinance) – to amend the Act with immediate effect. The Arbitration and Conciliation (Amendment) Bill, 2015 (Bill) was passed by the Lok Sabha (India’s lower house of parliament) on 17 December 2015 and the Rajya Sabha (India’s upper house of parliament) on 23 December 2015. It was held to come into force from 23 October 2015, the date of the Ordinance.
India’s aspirations to become a major international centre of arbitration have long been hindered by its arbitration laws and their judicial interpretation. These developments signal a welcome change in approach. The provisions of the Bill closely follow the recommendations of the Law Commission and go a long way towards reforming Indian arbitration law. Some of the major changes are outlined below.
The Bill was accompanied by another bill passed on the same day – the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 – which implements long-promised proposals to create specialised commercial courts. Commenting on these bills, DV Sadananda Gowda, India’s Minister of Law and Justice stated that they “reflect commitment of the government to improve investment climate and spur economic growth.”
There was some concern regarding the effect of these amendments on existing arbitrations, which, for the most part, was not addressed by the Ordinance. This issue was addressed by the insertion of a new section 25A, which clarifies that the Bill will not apply to arbitral proceedings retrospectively, unless agreed otherwise by the parties.
The Bill makes significant progress towards the Indian government’s stated goal of reforming arbitration law, which is considered to be a necessary step towards encouraging foreign investment in India. Some of the changes aimed at reducing delays are particularly unique and should be welcomed by the arbitration community. These changes will hopefully herald a bright new era for India, creating an arbitration friendly jurisdiction, where arbitration will be looked at favourably by all parties involved.
*Authors: Sherina Petit, Partner and Head of India Practice, Abhimanyu George Jain, Associate and Daniel Jacobs, Trainee Solicitor
Further information on these developments see:
Sherina Petit, International Arbitration in India: A Tale of Gradual Progression, November 2013;
Sherina Petit et al, India Anticipates New Arbitration Laws: Another Positive Sign for Those Looking at Business Opportunities in India, 2015(4) International Arbitration Report
Bharat Aluminium Company & Ors v. Kaiser Aluminium Technical Service, Inc. & Ors., (“012) 9 SCC 552.
Shri Lal Mahal Ltd v. Progetto Grano Spa, (2014) 2 SCC 433.
Law Commission of India, Report No. 246: Amendments to the Arbitration and Conciliation Act 1996, August 2014
Ibid., pg. 9
Amendments to the Arbitration and Conciliation Bill 2015, Press Information Bureau Press Release, 26 August 2015
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