The robustness of a country’s judicial system is a crucial determinant of its ability to attract foreign investment. Inefficiencies would lead to ‘exported litigation’ whereby, in order to resolve disputes, foreign investors flock to courts in jurisdictions other than the one in which they have made their investment, even though those disputes are intrinsically linked to the country where the investment was made in the first place.

Commercial Dispute Resolution in Indian Courts

When it comes to cross-border commercial litigation, courts in India are synonymous with delays and backlogs. Matters came to a head in 2011 when an international arbitral tribunal ruled against India in the White Industries case,[1] which represented the first bilateral investment treaty (“BIT”) action involving India. More pertinently, the main prong of the award was India’s inability to address judicial delays. The tribunal found that India’s delays in enforcing an earlier arbitral award in favour of White Industries constituted a breach of a clause in the India-Australia BIT that provided investors with ‘effective means of asserting claims and enforcing rights’ that was incorporated through the most-favoured nation (MFN) clause from the India-Kuwait BIT.

Fast forward to December 2015, and a Singapore court was concerned with whether delays and backlogs would hamper the Indian courts from being the appropriate venue for adjudicating a commercial dispute which also had a Singapore element. In Bunge SA v. Indian Bank,[2] the Singapore High Court refused to accept criticisms of delays in the Indian courts at face value and based on anecdotal evidence, but instead took note of the several reforms that the Indian Government has embarked upon to speed up the process of dispensation of justice. Based on the available evidence as well as the facts of the case where the principal parties and witnesses were situated in India, the Indian courts were found to be the more appropriate forum. In a stark contrast to the outcome in the White Industries case, judicial delays were not accepted as a ground to deny jurisdiction to the Indian courts.

Commercial Courts Act

Coincidentally, within days of the Singapore court’s decision, the President of India in January 2016 granted his assent to the Commercial Courts Act that will witness the establishment of commercial courts at a district level and commercial divisions and appellate divisions at the High Court level. The reforms ushered in by this legislation seek to completely transform the manner in which commercial cases are heard and tried in India. They include the establishment of specialised courts to deal with commercial disputes above a specified value, a strong emphasis on judicial efficiency through case management and an uncompromising stance towards time bound resolution of cases and appeals. Modern measures such as electronic filing and videoconferencing will be rolled out. Under this dispensation, unnecessary adjournments are frowned upon and strict timelines have been set, reinforced by limitations on courts’ discretion to condone delays.

The impetus for these reforms originated from the Law Commission’s reports that sought to resuscitate a “collapsed” Indian judicial system that was reeling from inordinate delays. Parallel reforms initiated through amendments to the Arbitration and Conciliation Act point towards the Government’s efforts to ensure speedy resolution of commercial disputes.

If the reforms are indeed successful, they could be a game changer for commercial litigation. As observed by India’s Finance Minister Mr. Arun Jaitley at the recent launch of the Asian Business Law Institute in Singapore,[3] the Commercial Courts Act is a path-breaking piece of legislation which has received support across India’s political spectrum and will expedite the settlement of commercial litigation and increase the ease of contract enforcement.

If the commercial courts can ensure speedy disposal of cases as proposed, foreign courts will no longer have to adjudicate disputes involving Indian parties when the facts clearly show India to be the appropriate forum. Greater certainty and predictability of dispute resolution would contribute significantly to the ease of doing business in India. Moreover, a stereotypical argument to adjudicate disputes abroad based on the sluggishness of the Indian judiciary will not hold water in overseas forums.

Cautious Optimism

At the same time, it would be imprudent to expect a sea change within a short span of time. Although the legislation has paved the way for the establishment of a commercial judiciary, much will depend upon how the new system is implemented. The onus lies on the various State Governments, High Courts and other administrative authorities to take necessary measures not only to set up the commercial judiciary but also to ensure that it functions in the manner intended.

Specialised commercial courts are not a novel phenomenon and exist in countries such as the United Kingdom. For cross-border disputes, newer destinations such as the Singapore International Commercial Court and the Dubai International Financial Centre Courts have gathered momentum. The structure, functioning and experience of these institutions could offer suitable models for implementation of commercial courts in India. Of course, adaptions would be required to suit the specific circumstances prevalent locally.

In sum, judicial reforms must continue to be at the forefront of the Indian Government’s priority. In pursuing its goal of “Make in India”, it must also endeavour to “make cases heard in India” by stemming the flood of exported litigation. Such a move would be welcomed not only by international businesses and foreign investors, but also by foreign courts that would be spared the predicament of assuming jurisdiction in cases that should rightfully be decided by Indian courts.

Sriram Chakravarthi is a Senior Director and Chief Legal Counsel at the Singapore Academy of Law, and Umakanth Varottil is an Associate Professor at the Faculty of Law of the National University of Singapore.

 

[1] White Industries Australia Limited v. The Republic of India, Final Award dated 30 November 2011. The Tribunal comprised J. William Rowley, QC (chairman), The Hon. Charles N. Brower and Christopher Lau SC.

[2] [2015] SGHC 330.

[3] Keynote Address by India’s Finance Minister Mr. Arun Jaitley on 21 January 2016.