More and more international trade in goods and
services tend to increase foreign direct investments in host
countries. While adequate precaution could be taken in
finalizing the terms and conditions of such investment
contracts, disputes may still a rise in the course of execution
of such contracts and hence it is of utmost importance that
the contracting parties have adequate legal remedies to seek
redressal of their grievances.
Trade related disputes are often resolved by the parties
opting for various Alternative Dispute Resolution (ADRs)
mechanisms such as, conciliation, mediation, mini trial and
arbitration. During the past liberalization period, several
new legislations in India provides for specialized dispute
mechanism such as the Telecom Regulatory authority of
India and appellate authorities under the Telecom
Regulatory Authority of India Act, 1997. The Insurance
Regulatory and Development Authority Act 1999 and Debt
recovery Tribunal Tribunal and Debt recovery Appellate
Tribunal under the Recovery of Debts due to Banks and
Financial Institutions Act 1993. Disputes arising out of
investment related contracts often involve multi party
transaction, which may necessitate several tiers of ligiation
in different for before such disputes could be resolved.
Investments in infrastrural facilities, like road, power, real
estate etc. often involve complex issues not only between
multiple contraction parties but also with non-contracting
parties like governments and governmental institutions.
Bi-lateral treaties may assure protection to investments
made in the host countries, but enforcement of the terms
thereof often pose serious hurdles in the resolution of
disputes arising in the course of execution of such projects.
Apprehension of flight of capital may warrant the host
countries to adopt appropriate regulatory measures relating
to foreign Direct Investments (FDI), experiences however
show that except for investments made in the capital market
i.e. securities and shares, such apprehension is rather
unfounded in respect of other investments. The investors on
the others hand, entertain their apprehension of not
receiving adequate protection in respect of these
investments from the host country. A satisfactory legal
regime for resolution of such disputes is therefore a must.
Difficulties aries when investors, whether individuals or
juristic persons like corporate entries seek their remedy in
the judicial forum in the host country when invariably the
defence of immunity of state and the state instrumentalities
as from being subjected to judicial process either in their own country or in a foreign territory is raised in respect of
transactions though commercial in nature, are claimed to be
sovereign acts. Even if there be any bi-lateral treaty to
protect their investments, covenants in the treaty perse are
not enforceable under the domestic laws of the host
countries unless the treaty obligations of the host country
are incorporated in a legislation, in which event, the
provisions of such law alone could be enforced, Instances of
governmental guarantees or counter guarantees in respect
of such investments are clear instances when the investors
have to face such a defence when they seek to enforce such
guarantees. National arbitration laws based or UNCITSAL
model could provide solution only in respect of admitted
commercial contracts and disputes arising therefrom but not
in cases where the public law intervenes with the guarnatees
and counter guarantees punished by the host state coupled
with a claim of sovereign immunity. It is in this arena that
the permanent court of Arbitration (PCA) may effectively
provide the forum for resolution of such disputes by suitably
altering its rules regarding standing . PCAs efforts to provide
its facilities at the regional level would go a long way in the
resolution of such disputes.
The author is a member of the Institute and the views expressed herein are his personal views and do not necessarily represent the views of the Regional Council |
