The India Opportunity

Is India still the jewel in the BRICs’ crown? Managing risk when investing in the country was the subject of a lively debate in London recently

As a leading emerging economy, India has long been an attractive destination for foreign investment, but recent tax changes and other controversial decisions have dampened investor sentiment.

To discuss the risks of doing business in India and how investors can make the most of the opportunities on offer, The Lawyer, in association with FTI Consulting, hosted its latest Briefing Live event on the subject of managing sovereign and regulatory risks in India at London’s Andaz Hotel.

The panel was chaired by FTI senior vice-president Amrit Singh Deo, who kicked off proceedings by asking what the panel saw as the biggest risks and opportunities for investors.

Briefings Live India


The first thing to bear in mind when looking at India is its complexity, said UK India Business Council chief executive Richard Heald.

“India’s GDP is growing at 5.3 per cent but if you narrow that down by states and sectors you will see wide disparities,” he noted.

It is important to weigh up the risks against the rewards, pointed out John Higgins, senior managing director, FTI Consulting.

“Compared with the other BRICs [Brazil, Russia, India and China], India is much easier to deal with – you just need to be determined to get it right,” he said. “There’s a website in India called where people publicly disclose bribery issues. I’d argue that it’s difficult to conceive that such a website could survive in countries such as Russia and China, but in India it’s extremely active and effective at highlighting issues, and getting them dealt with.”

Heald also stressed the importance of recognising how far India has come in recent years, in terms of transparency and good governance.

“Indians want to be accepted as good corporate citizens internationally,” he said. “We can point to some huge scandals, but we suffer from these things too, so I think you have to get things in perspective when you’re discussing India.

“It’s making huge strides in terms of governance and creating standards as good as Western ones.”

Amrit Singh Deo
Amrit Singh Deo

Delay tactics

Turning to disputes, Herbert Smith Freehills litigation partner Nick Peacock highlighted that although corruption is not a big problem in India’s judiciary, the time delays associated with litigation and arbitration do deter investors.

“In terms of the ability to resolve disputes, the problem really is with delays,” he admitted. “Arbitration is an alternative, but there are also problems with the use of arbitration in India. I hear from Indian colleagues that the record from start to finish for an arbitration process is seven years – just to start the arbitration and get the tribunal appointed. And on average it takes between five and eight years to get a decision out of ad hoc arbitration.”

What’s more, even if companies turn to London or Singapore to resolve their India-related disputes, enforcing awards back in India will be subject to unpredictable delays.

“A ballpark figure for the time it takes to enforce arbitration awards in India is somewhere between five and eight years,” Peacock added. “Some investors have got so frustrated that they’ve actually brought claims against the government for failing to have an effective court system. An example of this is the case of White Industries v Government of India.”

Competition between the states has also created an opportunity for international investors, he noted.

“There’s intense competition between the 28 states for inbound investment, and what you’ve seen recently is that good governance is rewarded at the ballot box and in investment flows to individual states, and therefore in tax revenues,” said Heald. “There’s a virtuous circle in trying to create a good business environment.”

Richard Heald
Richard Heald


But competition is not always a good thing, stressed Justin Coombs, senior vice-president at Compass Lexecon.

“In one sense competition between states is a good thing but if it gets to the level that subsidies or state handouts are used simply to attract investors, you have to raise the concern that this may distort the market.”

However, Coombs hastened to add that the country’s relatively new competition law also presents certain opportunities.

“In terms of risk, when you have a new law you have a new regime and this creates uncertainty,” he said. “In practice, however, that uncertainty is not as big as it might first appear because Indian competition law is heavily influenced by European law.

“There’s an opportunity for businesses here because they can influence the way the regulatory regime develops and influence decision-making.”

Nick Peacock
Nick Peacock


One of the concluding points of the debate centred on the use of arbitration and litigation under bilateral investment treaties as a negotiating tactic.

Few companies dare to get embroiled in disputes before first trying to resolve the problem out of court, highlighted Peacock.

“Investment treaties often give a backdrop to negotiations and it’s a sabre you can rattle, but that sabre is more rattled than drawn,” he argued. “Look at the retrospective tax situation Vodafone has found itself in – the chances are there’s an investment treaty claim in there somewhere, but it has got no interest in getting into a full-on fight with the Indian government.

“India is not the only country that is asking if it wants to be party to an investment treaty. To India’s great credit, it paid out on the White Industries award and, overall, investors are comforted by the investment treaty regime,” said Peacock.

“It’s a measure of last resort,” added Heald. “The issues you’ve seen with Vodafone and others are extreme and you’ve got to negotiate your way through that with extraordinary care. These are extreme measures, but in the middle there’s a fair degree of dialogue that allows you to move things forward.”

Sponsor’s comment: FTI Consulting

This timely panel discussion provided a fantastic opportunity to review the opportunities India presents for corporates and law firms wishing to do business in the country.

The panel, which included UK India Business Council chief executive Richard Heald, and Herbert Smith Freehills India dispute specialist Nick Peacock, as well as FTI competition expert Justin Coombs and Ethics and Compliance specialist John Higgins, were able to fully assess many of the risks as well as opportunities India presents for lawyers working in the region.

The panel were divided in their views, with Peacock stressing that huge time delays in disputes create a real barrier to those considering investment, while Higgins was much more optimistic about the opportunites given that in terms of corruption he considers it a safer option compared with the Bric countries as India has a much more open culture, evident in its active bribery disclosure website.

Our experience with both international and Indian corporates has shown corruption issues do still exist, but the risks are certainly not beyond the capability of ethical and determined businesses to manage.

In terms of the new competition act, Coombs was able to dispel some of the concerns around the uncertainty it presents by highlighting its similarities with European competition law, on which it has been based. Our experience in competition matters in India has shown that, although the authorities will interpret the law taking account of factors that are unique to India, in practice they pay a lot of attention to the approaches used by competition authorities in other countries, especially the approaches used in Europe.