Altering realities

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The more things change, the more they remain the same

While cynics have long drawn strength from the truism in this old French saying, many would see it as an apt description of attempts to transform India. After the turbulence of demonetization, which may or may not have struck a fatal blow to the sizeable black money economy, companies and businesses up and down the country are preparing for more deep-rooted change with the impending implementation of a goods and services tax (GST).

India Business Law Journal 2017This much needed overhaul of India’s tax system is to herald the creation of “One India, One Market, One Tax”. Yet the considerable challenges it will throw up are cause for concern. With less than three months to go for GST to potentially take effect, questions remain about its specifics: the framework for GST, all-important tax slabs, and last but not least a proposed anti-profiteering clause. Will GST be truly transformational, or will it be more of the same? And can India afford any more of the same?

This month’s Cover story analyses the private equity (PE) landscape and picks out key themes for investment into India. Zeroing in on potential deals in a market characterized by “too much money chasing too few deals” – as Suneeth Katarki, a partner at IndusLaw, puts it – can be a challenge. This is compounded by legal and regulatory hurdles. Add to this, the increased liabilities faced by nominee directors of a PE investor, on account of the Companies Act, 2013, which has expanded the duties and liabilities of company directors.

All of this is topped off by the need for robust due diligence – an area where PM Devaiah, general counsel of Everstone Capital, cautions against a “tick-the-box” approach so as to avoid surprises after the deal closes. But the fact is that despite a slowdown in the pace of deals on account of events such as demonetization and a lack of real change on the ease of doing business front, the overall outlook for India is positive. It appears that change or no change, PE investors continue to be upbeat about the India story.

Writing in this month’s Vantage point Rajneesh Jaswal, head of legal at Metro Cash and Carry India, makes the case for a deep-rooted change of corporate culture in order that companies meet their compliance requirements in a meaningful manner. He argues that compliance is not merely about filing forms or about slogans, but about instilling a culture of compliance and driving change from within, which cannot be achieved overnight.

In Banking on secrecy we turn the spotlight on data privacy in the context of the banking sector. As we analyse elements of the legal and regulatory framework for the protection of information given to a banker we ask the all-important question: how private is such information? This is an area of concern following the push to go cashless that followed the demonetization move.

At a New Delhi function marking the 50th anniversary of UNCITRAL, Cherie Blair QC gave a keynote address on global standards for rules-based commerce. The speech, which Blair adapted for our readers (In the interest of fairness), mentions the unintended consequences of globalization that as she says has sparked a backlash. As such, Blair says states need to be able to “take measures that are aimed at protecting the environment or promoting policies for the benefit of their citizens without fear of being sued. If they are prevented from doing so, then international trade will truly lose the support of the people, and most concerning, its legitimacy.” Pertinent issues that will no doubt be addressed by UNCITRAL, the core legal body of the UN for international trade.

This month’s What’s the deal? analyses the legal and regulatory hurdles that M&A activity in the insurance sector will encounter. It does this in light of a recent high-profile merger in the insurance sector and against the backdrop of laws and regulations that present considerable concerns and ambiguities. Many of these will become clearer once this deal is evaluated in terms of the relevant provisions of the act and the regulator‘s amalgamation regulations, and approval is accorded with observations and guidance that will benefit subsequent transactions.

Finally this month’s Intelligence report investigates the intriguing question of whether India will ever permit the arbitration of competition law matters, which most major jurisdictions have now moved towards, despite initial scepticism. In India, however, the Competition Act is overriding in nature and by inference competition principles will prevail over underlying principles (such as party autonomy) of the Arbitration and Conciliation Act. In addition, the Indian Supreme Court has taken a strict approach when it comes to arbitrability of competition law. It has consistently leaned against arbitrating such matters.

Yet as we detail, a blanket ban on arbitrability of competition law-related disputes could stifle party autonomy and the growth of arbitration in India. It has been argued that modifying Indian law to enable arbitration of such disputes would be a step in the right direction insofar as it would also help reduce uncertainty and the risks in enforcing awards.

Allowing this would create real change.

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