Originally from World Arbitration and Mediation Review (WAMR)

India is currently one of the fastest growing countries and is increasingly being considered as a foreign direct investment hub by investors worldwide.   In fact, the recent annual budget has revealed that from 2014 to 2019, foreign direct investment in India rose to $284 billion.  This represents an increase from the 2009 to 2014 total of $190 billion resulting from foreign inflows growing at an exponential rate of 15%.   While such statistics are certainly  beneficial to a foreign investor in assessing potential growth opportunities in a country, foreign investors also consider how developed the extant arbitral and judicial mechanisms are.   This helps investors understand whether plausible recovery options exist in the event of a breach of obligations by the Host State, which is an equally important consideration.  Such proceedings between foreign investors and States are governed by investment treaty arbitration,  which arises out of Bilateral Investment Treaties (“BITs”) or Bilateral Investment Protection Agreements (“BIPAs”) entered into amongst Host States.  Today, there are around twenty-four known investment treaty proceedings initiated against India,  a number that will only grow in the future as foreign investment rises.   Although the future with respect to newer BIT commitments remains uncertain in lieu of India’s recent termination and renegotiation of existing investment agreements,  there is a need to explore the confluence of domestic arbitration law and accepted principles of international arbitration to carve out an overall conducive framework for both existing and potential foreign investors. 

Currently, India’s 1996 Arbitration and Conciliation Act (“A&C Act”) serves as the sole self-contained legislation governing all arbitrations connected to India.   Whilst Part II of the A&C Act (“Part II”) dealing with the enforcement of “foreign awards” is almost entirely equipped to deal with domestic and international commercial awards, the same cannot be said of investment treaty awards (“investment awards”).   Additionally, India’s reluctance to undertake  investment protection-centric international treaty ratifications leaves foreign investors (mainly judgment-creditors) in an unjust situation, in that they cannot enforce awards in India that were rendered against India. It is also equally difficult to enforce an award against India in other jurisdictions. This position only undermines India’s efforts at becoming more foreign-investment friendly.

This paper argues that as currently enacted, the A&C Act cannot be interpreted to include awards rendered by investment tribunals. Moreover, it examines India’s current investment treaty obligations and relevant jurisprudence to carve out plausible ways in which foreign investors can have investment awards (against a foreign Host State having its extra-territorial assets in India, or the Union of India itself) enforced in Indian Courts.  It then moves on to assess the feasibility of such approaches to demonstrate how the current framework does not demonstrate a pro-enforcement stance by examining judgments and relevant legislations.  The article then concludes by arguing that there is a need to either enact a separate legislative mechanism to deal with the enforcement of investment awards, or amend the A&C Act expressly to that effect.  A brief reference will be made to the practice across other jurisdictions to seek guidance with respect to such an amendment.  Last, the paper will examine whether the latter option would be consistent with the principles of Part II of the A&C Act.­­­­­­­­­­­­­­­­­­­­­­­­­