Next week, United States Trade Representative Katherine Tai and Deputy United States Trade Representative Sarah Bianchi will be in India to meet with their counterparts on expanding the bilateral trade relationship. The visit marks the resumption of the U.S.-India Trade Policy Forum (TPF), a dialogue established in 2005, which has not convened since 2017. Its purpose is to facilitate discussions on differences in trade and economic policy, as well as the expansion of trade and investment. This is a positive development.
India is a critical trade partner for the United States with the flow of goods and services between both countries steadily increasing over the last decade. A reliable trade partner is defined just as much by its adherence to the global rules on free and fair trade its government has signed up for, and India has a poor record on that score.
The USTR is responsible for ensuring U.S. interests are advanced amongst trading partners. In light of that, the dialogue set to take place next week provides a unique opportunity to highlight a concerning trend affecting American businesses and investors in India: the weaponization of the state’s judicial system and law enforcement agencies to evade international judgements and undermine the rules of global trade.
The ongoing case between Devas shareholders and the Indian government provides a cautionary tale. India’s actions in this case expose the lengths to which the Indian government is willing to go to avoid honoring international arbitration awards – even mobilizing state law enforcement agencies to target, harass, and intimidate American citizens.
India Continues to Undermine International Arbitration Rules
Foundational to trade and investment is adhering to contracts and agreements, an area in which the Indian government has fallen woefully short. Devas has experienced these short-comings at first-hand. From the abrupt and unlawful cancellation of Devas’ contract with the Indian space agency to the evasion of international arbitration awards, the Indian government has proven to be an unreliable and risk-ridden partner.
Despite being a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, India has shown a blatant disregard for this tenet of international commercial law. Devas and its shareholders have been awarded three binding international legal judgements against India that were adjudicated under the rules of the International Chamber of Commerce, the UNCITRAL Model Law, and the New York Convention itself. While India pledged to abide by the terms of the latter 50 years ago, the government has chosen to evade the awards instead of honoring them.
Mobilizing State Agencies Against U.S. Citizens
Central to India’s evasion strategy is harassment and intimidation of Devas officials and shareholders who are U.S. citizens. To execute this campaign, the government activated the Registrar of Companies, the Central Bureau of Investigation, the Enforcement Directorate, and tax authorities to raid Devas offices, seize records and bank accounts. The Indian judicial system is also a key actor in this campaign as it has thus far allowed the government of Prime Minister Narendra Modi to go unchallenged in its crusade against Devas, and courts have glossed over the legal obligations India faces in this case. Indian courts have even entertained wild conspiracy theories and fraud allegations targeted at Devas and its shareholders
This behavior is by no means limited to Devas. Other U.S. companies and investors, today and over the years, have been, and will continue to be targeted in a similar manner. The behavior of such an ally is troubling.
Declining Investment Climate
The U.S. government is aware of the realities of investing in India. The 2021 Investment Climate Statements report, released by the U.S. State Department, asserts that India “remains a challenging place to do business.” The lack of adherence to, or respect for, the rule of law and international legal judgements should raise alarms to anyone considering investing capital in India, as the Devas case has shown.
As the TPF convenes next week, we are reminded that the U.S. and the West need an India that abides by the international rules of engagement on trade matters. India will only fit that mold if it takes its commitment to global agreements – like the New York Convention – seriously.