India is revelling in the start of the 2010 Indian Premier League, a sports phenomenon that has drawn international cricketers to play for Indian teams
Back on Indian soil after being relocated to South Africa last year, this cricketing extravaganza is as much a revenue-making machine as it is a celebration of a confident India integrating on many levels with the rest of the world. The party is perfectly timed: as international cricket players make their way to India for the start of the season, many of the country’s leading corporations are heading in the opposite direction.
Following a lull in 2009, outbound investment from India is back with a vengeance (Clear skies ahead?, page 21). Some observers even predict that the level of outbound investment in 2010 will exceed the previous record set in 2008. “We have clearly observed an increase in the number of outbound investment deals originating from India, as world class, financially stable Indian corporates look overseas,” says Thomas Britt, a partner at Debevoise & Plimpton.
What makes this shopping spree all the more remarkable is the sheer diversity of targets that are being eyed by acquisitive Indian businesses. Everything from infrastructure projects in Africa to oil sands in Canada and logistics companies in the UK is fair game for India’s corporate powerhouses and, increasingly, for smaller companies that are venturing overseas for the first time.
Yet as Bharti Airtel’s failed attempts to merge with South Africa’s MTN illustrate, cross-border M&A deals are fraught with legal, regulatory and political difficulties, both in India and the destination countries. As the global economy strengthens and outbound investment continues to take off, inexperienced or ill-advised investors may well experience bumpy landings.
Those that do succeed must contend with other dangers, notably the risk of disputes arising with foreign parties. Indian companies are long accustomed to resolving their disputes in the domestic courts, but writing in this month’s Vantage point (page 20), Paul Mitchard QC argues that a change of mindset is badly needed.
Mitchard urges Indian companies to adopt international arbitration as their dispute resolution method of choice. Arbitration is considerably faster than litigation, particularly in India, where the courts have the largest backlog of cases in the world. It is also well-policed by arbitral institutions and comes with virtually no inbuilt bias. Add to this the almost-worldwide enforceability of awards and the advantages of international arbitration readily outweigh those of litigation.
Mitchard’s advice is poignant. At a time of growing interaction between Indian and international businesses, it is only natural that there will be a corresponding rise in the number of commercial disputes. This is particularly true in the field of intellectual property protection, where the internationalization of businesses has transformed local enforcement challenges into global ones. In this month’s What’s the deal? (page 35), we investigate how the Tata Group has risen to the challenge of protecting and enforcing its intellectual assets around the world.
As Indian companies grow accustomed to their changing role in the global economy, both Indian and international companies are being forced to change the way they conduct their business in India. The introduction of the country’s new competition regime has major implications for all mergers and acquisitions that have a territorial nexus with India. The first of this month’s Spotlight features (Playing safe, page 29) provides an important update on the implementation of the new competition regime and expert advice on the compliance mechanisms that companies should be putting into place. It warrants the careful scrutiny of all India-based and international businesses that are engaging in M&A activities: those that fail to comply with the new law risk incurring heavy fines, criminal sanctions and even orders to disband.
Our second Spotlight (page 32) throws light on a different, yet equally complex, area of business law: labour and employment. India’s labour laws differ markedly from those in many other jurisdictions and standardized employment contracts used by international companies in other countries may not be applicable. Employers in India must grapple with overlapping regulations at national and state levels. They must also grow accustomed to some unusual quirks. For example, the employment of “workmen” is governed by different regulations than those that apply to other categories of staff.
Indian companies are building global brands at an unprecedented rate. Yet, with a few notable exceptions, the same cannot be said of the country’s legal profession. Ask the London-based head of legal at an international corporation to name 10 Indian law firms. The chances are he or she will struggle. With this in mind India Business Law Journal has gone below the international radar to introduce foreign clients to some of the hidden treasures of the country’s legal profession (Intelligence report, page 37).
For each well-known “brand” such as Amarchand Mangaldas, AZB, Luthra & Luthra or Trilegal, there are dozens of lesser-known law firms with a wealth of expertise or specialist services on offer. As the embrace between India and the wider world strengthens, international clients would be well advised to explore the depth and diversity of the country’s rich legal market.
