India Business Law Journal –  February 2017

Look before you leap

Every policy tweak can be expected to have an equal, and often opposite, reaction

This truism, which has its roots in Isaac Newton’s principles of motion published over 300 years ago, is arguably at the heart of the troubles of the Trump administration in the US. That a change of visa and immigration policy in the US, albeit somewhat drastic, can trigger considerable risks for people and companies at large, demonstrates once again that the world is inextricably interconnected.

The chaos, both inside and outside the US, following Trump’s recent travel ban should go down as a lesson to all governments on the need to think through and prepare for every equal, and often opposite, reaction to their every action. Is this too much to ask for?

Meanwhile in India, the 2017-18 budget prompted a lot of commentary both before and after it was presented on 1 February. Coming hot on the heels of the mammoth demonetization exercise undertaken from 9 November 2016, the budget was expected to continue attempts by the Modi government to curb the use of black money. The reality, as detailed in our Cover story, which examines what the budget means for companies, has met these expectations. Our coverage focuses on several amendments that carry legal and economic ramifications. These include the introduction of thin capitalization rules in the income tax regime and an amendment to transfer pricing rules that will require international commercial structures to be re-examined. In addition, the budget has brought both relief and some concerns regarding the capital gains tax regime. As for the real estate sector, we detail how the budget has sought to enhance opportunities for homebuyers, developers and some categories of investors. Overall, as India faces challenges from global economic and political uncertainty, the budget seeks to provide clarity and continue reforms that are aimed at accelerated growth.

In Banking on Asia the general counsel of the Asian Infrastructure Investment Bank (AIIB), Gerald Sanders, provides insights into his unique role in building a legal division for what is essentially a start-up in the world of international financial institutions. India is the second-largest shareholder of the AIIB, where Sanders and his team are currently exploring how best to use external lawyers. “We will need external lawyers to advise on private-sector transactions,” says Sanders, adding that the AIIB, which was set up in 2015 has a great deal of flexibility under its charter – and sizeable capital – and is looking to make an impact.

In A push for procedural certainty we focus on the myriad rules, regulations, orders, circulars, clarifications, advisories and office memos issued by various regulators, many of which fail to state the authority under which they are made. Such delegated legislation can create thorny issues for lawyers, often resulting from procedural shortcomings and ambiguous drafting.

Recent amendments to India’s arbitration law provide the starting point of this month’s What’s the deal? , where we ask if India can really become a hub for international arbitration. PK Malhotra, a former law secretary, who provides his views on what needs to change to make India’s dispute resolution process more efficient, says there is a “big question mark” on India’s aspirations. Referring to the court system, Malhotra says the mindset of the people involved has to change. This, he believes, may happen as the discipline that is currently beginning to take root in the newly introduced commercial courts can be brought into other courts as well.

In this month’s Vantage point PM Devaiah, a partner and general counsel at Everstone Capital Advisors, argues that differences between the central and various state governments undermine efforts to present India as a favourable commercial destination. Devaiah says “we are surely setting the clock backwards” when in an era of globalization and seamless business corridors states embark on populist measures – such as in Tamil Nadu where a ban on Coca-Cola and Pepsi is set to come into force on 1 March.

This month’s Intelligence report reveals the winners of India Business Law Journal’s 2016 Indian Law Firm Awards.

The year gone by has been an interesting one for law firms across the country, which face the dual challenges of a downward pressure on fees and in-house legal teams undertaking a greater amount of work themselves. To find out which law firms finished the year on top, our editorial team sought the opinions of in-house counsel and other qualified observers of India’s legal profession, both in India and around the world.

The results are in, and the top award of Law Firm of the Year goes to Khaitan & Co, which one client aptly describes as “second to none”. Another happy client, Anuj Puri, the chairman and country head of JLL India, says “to say that we are satisfied with the services offered by Khaitan & Co would be an understatement”.

High praise for a law firm that has gone from strength to strength over the past few years. Our sincere congratulations to Khaitan & Co and the other winners.