The ease of evading inconvenient court orders, laws and regulations threatens to undermine India’s economic growth. The time for reform is ripe. Ben Frumin reports
Vikram Nankani’s client had what seemed to be a straightforward deal – to sell another company a significant amount of material used in the steel and cement industry. When the buyer backed out for what Nankani’s client believed was a bogus reason, the parties found themselves in arbitration.
Nankani, a partner at Economic Laws Practice in Mumbai, thought he had “a very simple, straightforward case of breach of contract”. The three-member arbitration tribunal seemed to agree, awarding his client around US$1 million.
Then came the hard part: enforcement. The buyer appealed and a district judge threw out the award over an alleged procedural miscue, saying Nankani’s side had dropped two witnesses after filing affidavits. “Groundless, preposterous,” Nankani responds, calling the decision “totally alien and foreign to the award or the merits” of the case.
The issue has yet to be resolved. While the arbitration was completed in just 10 months, the matter has since spent five years languishing in the courts. “It’s really frustrating,” Nankani laments. “And there’s nothing that can be done.”
Nankani’s story illustrates an ongoing trend that is both troubling and frustrating for many lawyers: lax and inconsistent enforcement of laws, judgments, regulations and awards. No matter the sector – intellectual property rights, financial regulation, arbital awards, taxation – the refrain is the same: India’s enforcement regime needs urgent reform.
“India has a plethora of laws covering almost every sector,” says Anindita Roy Chowdhury, an associate at LexCounsel. “But unfortunately, it is the enforcement of these laws that is severely lacking and rather challenging.”
That means trouble for clients who “find uncertainty more frustrating than a rigid set of rules – or no rules at all,” says Eliab Erulkar, a partner at Baker & McKenzie in New York.
“Very often you’ll get a judgment for payment of a sum of money,” says Clifford Chance partner Martin Rogers. “But if the defendant doesn’t pay up, what do you do?”
The paucity of options is a major problem for India. “Unless there is a change in the mindset and attitude, the lack of proper enforcement may be a stumbling block for India’s economic success and growth,” says Vijaya Sampath, group general counsel and company secretary at Bharti Enterprises.
Enforcement is a particular problem in criminal proceedings and contracts, says Trilegal partner Anand Prasad. Rogers adds that enforcing an international decision is a “nightmare”.
Enforcing intellectual property rights (IPR) can also be a headache. “Weak intellectual property enforcement is a major barrier to increased trade,” says Ajit Warrier, a partner at Luthra & Luthra. “This is unfortunately the case with IPR enforcement in most developing countries, including India.”
One of the major problems in enforcing patent rights, Warrier says, “is the acute lack of awareness of patent basics in the judiciary and even the legal fraternity. Moreover, there is no criminal remedy available for the infringement of patents. This often leads to insufficient remedy in the infringement suits.”
For the most part, India’s laws and regulations are satisfactory. It’s enforcement that’s the problem. Many of the country’s worst enforcement problems stem from massive backlogs in the courts and antiquated administrative procedures that are easily exploited by those seeking to derail the enforcement process.