Building legal infrastructure

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How serious is India about speeding up the delivery of justice?

The recent budget promises a three-fold increase in “plan provision” to help the Department of Justice build judicial infrastructure and e-courts. The extra money is badly needed: the World Bank’s Doing Business 2011 report concluded that only East Timorese companies have a harder time enforcing contracts than their Indian counterparts. However, the fact that the promise was buried in the 117th paragraph of the finance minister’s 197-paragraph budget speech – in a sub-section on “some other initiatives” – does little to inspire confidence in the government’s commitment to modernizing the judiciary.

The challenge of upgrading the country’s infrastructure was given greater prominence in the budget. Huge strides have already been made in this area, but there is much still to be done. Investors’ appetites are returning following the economic downturn and the opportunity for further investment is enormous. Yet, for a sector that is so vital to the country’s economic development, it is ironic that regulatory impediments, compounded by concerns over government interference, are still deterring investors (Bumps in the road, page 19).

Complex regulations, overlapping regulatory authorities, market access barriers, restrictions on offshore lending and limits on the repatriation of funds are just some of the issues bemoaned by infrastructure developers. And as if these problems aren’t enough, a ghost from the past is spooking investors. Discussing the debacle over the proposed sale of Cairn India to Vedanta Resources, Bob Nelson, a partner at Akin Gump Strauss Hauer & Feld, draws parallels with the saga that paralyzed the Dabhol power plant in mid-90s. “The Cairn-Vedanta matter underscores concerns that reached a high water mark during the Dabhol period,” he says.

Leader 1103For those operating in this challenging environment, the risk of becoming embroiled in complex legal disputes is high. And with so much at stake – both for investors and India’s economic development – the importance of resolving such disputes quickly and effectively is paramount. Some observers, however, question whether India’s lawyers are up to the job. Writing in this month’s Vantage point (Delays ahead?, page 14), A Balasubramanian, the senior director of project finance at Infrastructure Development Finance Company, argues that many lawyers lack sufficient understanding of the issues that arise during infrastructure disputes. He calls on Indian lawyers to “raise their game”, arguing that “the future of India’s infrastructure sector may well depend on it”. His words are likely to resonate with many.

The disputes to which Balasubramanian refers typically arise from breaches of commitment by an investor or the government. They are generally handled by corporate lawyers, often those with a specialization in the field. Yet, one dispute with its origins firmly in an infrastructure project is being fought out by intellectual property lawyers.

Delhi High Court is grappling with a complex trademark case arising from a campaign by environmental group Greenpeace against the construction of a port in Orissa. Greenpeace argues that the port – a joint venture between Tata and Larsen & Toubro – poses a threat to an endangered species of turtle. To raise awareness, the group published a video game called “Tata vs Turtle” on its website. The game includes a stylized version of Tata’s “T within a circle” logo as well as references to “Tata demons”. Tata responded by filing for an injunction (Tata and the turtles, page 15).

The first hearings and judgment in this intriguing case have taken the dispute from the domain of trademark law into the highly charged realm of freedom of speech. The implications are significant for all trademark owners.

Another development with significant implications is the imminent introduction of India’s new takeover code. Indeed, for investors who are interested in acquiring a shareholding in an Indian company, the rule change may present a unique opportunity to engage in “regulatory arbitrage”.

As Cyril Shroff and Amita Choudary of Amarchand Mangaldas explain (Playing by which rules?, page 32), investors who find the existing rules attractive can pursue their deals now, while those who stand to benefit from the new regime can wait for its implementation. Our coverage offers expert advice to investors who are undecided about which rules to play by.

An unfortunate aspect of today’s India – and one that generates much disquiet – is corruption. Business leaders face the difficult balancing act of operating in an environment in which corruption is rife, while at the same time complying with national and international laws that prohibit it. Recognizing this challenge, India Business Law Journal spoke to risk consultants Nick Panes and John Bray to find out what companies should be doing to comply with anti-corruption legislation and promote “clean” business practices (Battling the bribes, page 27).

Panes and Bray warn that ignoring the problem can prove costly. They give examples of high-profile organizations that have fallen foul of anti-bribery laws and advise all companies to implement effective anti-corruption programmes.

In this month’s Intelligence report (Getting IT right, page 35), we investigate the use of information technology in Indian law firms. Most experts agree that technology is now a vital component of the business of law. Nikhil Chandra, the CEO of Rainmaker, goes as far as to say that it will become “a key differentiator among law firms”.

In spite of this, lawyers have been a slow adopters. “Law firms are not using technology to the level that you would expect,” says Pavan Duggal, a Supreme Court advocate.

Our coverage considers a range of IT solutions for law firms and examines how they might be deployed. With the government promising a finance boost for e-courts, it’s high time that India’s lawyers became more tech savvy.

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