Barriers to FDI in India – UPSC GS3

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Utility: Content can be used in questions related to FDI, Ease of Doing Business etc.
Facts:
  • India attracted the highest ever FDI of $81.72 billion in 2020-21.
Impact of Arbitration Awards:
Honouring contracts and enforcing awards are vital to attracting the confidence of FDI investors. However, a lack of confidence in the host state’s credibility towards the rule of law hampers FDI investments. Following are some such examples.
  • Last year India had lost two high-profile bilateral investment treaty (BIT) disputes with Vodafone and Cairn Energy on retrospective taxation.
  • Cairn has launched legal proceedings in the U.S. to enforce the arbitral award of $1.2 billion by seizing the assets of Air India.
  • Antrix and Devas Multimedia case:
    • The agreement was arbitrarily annulled on the grounds of national security.
    • This annulment led to a commercial arbitration between Antrix and Devas Multimedia at the International Chambers of Commerce (ICC),
    • India lost the case.
    • The ICC arbitration tribunal ordered Antrix to pay $1.2 billion to Devas after a U.S. court confirmed the award earlier this year.
India’s wilful noncompliance attitude towards adverse judicial rulings.
  • Whenever India loses a case to a foreign investor, immediate compliance rarely happens. Instead, efforts are made to delay the compliance as much as possible.
  • For instance, After the ICC award, Indian agencies started investigating Devas accusing it of corruption and fraud.
  • National Company Law Tribunal (NCLT) ordered the liquidation of Devas on the ground that the affairs of the company were being carried on fraudulently.
  • Further, the NCLT directed the official liquidator to prevent Devas from perpetuating its fraudulent activities and abusing the process of law in enforcing the ICC award.
  • This has led to, Devas issuing a notice of intention to initiate a new BIT arbitration against India.
  • The non-compliant behaviour on India’s part shows a willful disobedient attitude towards adverse judicial rulings.
  • This will not help India in attracting global corporations to its shores to ‘make for the world’
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