The decline of the rule of law in India under PM Narendra Modi, and the rise in risks for investors, is becoming more and more widely known.
This week, former UK Conservative Member of the European Parliament and Director-General of the British Chambers of Commerce, John Longworth, writes in the Daily Telegraph about the risks for the UK in pursuing a trade deal under Modi given “India’s brute force behaviour” towards Western investors.
Longworth highlights that India is “near the bottom of barrel in the global rankings of ease of doing business,” and adds that “[w]ithout the core principles of rule of law and investment protection, the value of any UK-India trade deal which might emerge will be much diminished.”
He cites the case of Devas, “three independent arbitration tribunals have ruled that the Indian government summarily cancelled a contract without cause at great cost to the investors: compensation has been awarded to the tune of £1 billion.
“Despite the rulings of these tribunals, the Indian government has failed to pay any compensation. The company’s business in India it appears, is about to be seized by a government-appointed liquidator. Unjustified expropriation of private property is the antithesis of the rule of law.”
Kangaroo Judicial System
Outside of seeking international arbitration for disputes, the Indian judicial system provides little comfort or redress for investors that have had their assets seized, contracts unlawfully terminated and employees harassed by state authorities.
Freedom House’s latest Freedom in the World Report 2021 is scathing, ““The judiciary is formally independent of the political branches of government […] However, lower levels of the judiciary suffer from corruption, and the courts have shown signs of increasing politicization… Also in 2020, the president appointed a recently retired chief justice to the upper house of Parliament, a rare move that critics viewed as a threat to the constitutional separation of powers.”
Freedom House downgraded India’s ranking on Rule of Law, with its judiciary ranked as equivalent to Madagascar and Togo.
Under Modi, the Indian government has also cancelled over 50 Bilateral Investment Treaties (BITs) – and has ignored its obligations under countless others. This is textbook behaviour of a scofflaw regime, not a free democracy.
This anti-investor approach has a real-world impact: before the COVID-19 pandemic, the Indian economy had sunk to its lowest ebb in over 40 years. This is the result of policies that are anti-investor, anti-rule of law, and pro-corruption.