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BIT Protection of Foreign Investments in Times of Volatile Currency, Slow Growth, and Political Uncertainty in India



by Geoffrey S. Stewart
Jones Day - Washington Office

Sylvia Tonova
Jones Day - London Office

Baiju S. Vasani
Jones Day - London Office

October 11, 2013

Previously published on October 2013

A depreciating rupee, slowing growth, and high inflation are some of the many risks confronting foreign investors in India. With elections due to take place in less a year, political uncertainty is also likely to afflict the country, which is home to 1.3 billion of the world's population. After the rupee reached record lows in August, the battered currency regained some ground in the last few weeks following announcements of planned reforms by the new head of the Reserve Bank of India, Dr. Raghuram Rajan. While reforms would be welcome by India's foreign investment community, experience indicates that government measures enacted in response to currency and economic crises, while intended to promote the general welfare, often result in unfair or discriminatory treatment of certain investors. Consequently, for example, the Asian economic crisis in the late 1990s spawned several high-stakes arbitrations by foreign investors against Indonesia. Similarly, more than a dozen foreign investors commenced international arbitration proceedings against Argentina following measures taken by the government to deal with the financial crisis in 2001. While no one is claiming India is in the middle of a full-blown crisis or would even necessarily take measures that would adversely affect foreign companies, investors should nevertheless be stepping cautiously.


 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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