ADR IN NEW ERA: IS INDIA READY FOR 4TH INDUSTRIAL REVOLUTION WITH ITS RIGID ADR POLICY
– Bhuvnesh Sharma & Kaushiki Sharma
1990’s era can be termed as the era of change. The era in which India strived, not only to change the pace but also the narrative of growth with a penchant for a wider integration of India as a market , and dooming the various barriers which were built high to protect the reach to Indians. Thus India changed her style of “tryst with destiny”, but of course this change required a significant shift and this shift had to take place in consolidated and organized way.
India, in aim to follow above narrative became a resolute to progressively adopt- Liberalism as a thought for upcoming policies which will result in her better acceptance in the globe and decreasing the numerable barrier to this thought by opening ways of both foreign and domestic private players in her territory. The participation of the domestic private players was done by tackling the issue of sick public sector enterprises and giving them in the hands of private players and providing them with assurances, incentives and creative platforms.
The integration of foreign private players could only be done by increasing their participation and by providing them with confidence of safety in investment and gradually enlarging and expanding their role in domestic market which in turn will result in increased competition and shattering monopoly of some enterprises. The goal was promotion of creativity in the market and this was assured by adoption of one of the significant development of “contemporary International Economic Laws in lines with Liberal ideology” in form of Bilateral Investment Treaties.
2000’s marked the arrival of all together a new period, and 21st century was back then already declared as the glorious period of 4th Industrial Revolution, this period of technology is based on convergence of digital, biological and physical innovation. Such digital convergence requires an expensive and a new methodology which deals with science and also collaboration and a collective “mastermind”. This phenomena is very difficult to achieve by any single state or any single entity, and thus innovation in 4th era can be achieved by “collective effort” of various states and entities, the possibility of fulfillment of the thought can only be done by promotion of “research” , Research thus require a huge pool of talent, finance and also massive production and trial of research.
It is therefore crucial need for a harmonious relationship between states so that there is a great leeway provided to one country to another, so that private and public relationship grows easily and promptly. For a developing country, thus it is extremely important to provide and maintain a good profile so that it can become a host for research or collaborator with such techno-digital giants to foster development and acceptance in this area. And hence, a sound BIT policy is a must but Does that means that country has to compromise its prominence and sovereignty and some important rights? Indian recently have made her BIT more stringent, is it going to help in 4th Industrial revolution is what actually discussed in the paper in respect with International Arbitration.
AFFINITY OF INDIAN GOVERNMENT’S APPROACH WITH DAVID SCHNEDIER PERSPECTIVE : IS IT GOOD OR BAD?
David Schnedier is one of the contemporary thinkers of investment law. He presented a work where he discussed various aspects of Tocquevillian reflections on Investment law. Tocquevillian is one of the most remarkable figures in the history of modern political science and also is one of the first promoters and defender of democratic ideals. His views about democracy were not only restricted to democratic ideals but he wanted every institution to play a significant role in delivering the same. Investment treaty law makers along with other supporters have discussed much about his relevance in contemporary science and ideology of nations and its role in treaty formation.
Tocquevillian policy is based on the fact to protect the democracy and safeguard it from back lashing. One of the key dangers to any investment policy has been populist government which runs on the principles of majortarinism . There have been various episodes worldwide and the future is not total immune of such stances. India too has witnessed this in the case of Dabhol Power Plant controversy. Various countries have fallen prey to this tactics by politicians.
Though majoritarianism is a draconian impediment to the investor, one of the key area which gets weakened is “Democracy” as the rights of the public is generally constrained and tightly packed by the treaty and if there is change in the views then compensation is to be provided, considering compensation as “meager” will be a joke on countries like Argentina who have paid billion of dollars. The element of such treaties is that once made these are considered as a perceived “advance approval of the interest of the state, thus understating the democratically authorized institutions”
India is not part of ICSID dispute settlement system, and the rationale of the government regarding the national treatment is that it is hijacking of the domestic legal system, sovereign dragged. There are proponents who say that such clauses are nothing but a foul play and gives excessive powers to other extraterritorial bodies like for example – 1988 Italy – Mozambique , which even claims that if there is change in the laws , the permission of investor has to taken.
The major criticism bounced when an evident example of callous treaty making resulted in Argentinan crisis. One of the cases against has been “BG Group Public Limited Company vs. Argentine Republic.”, where in the name of doctrine of Fair and Equitable treatment and legitimate expectation, country was denied the right for declaring national emergency, and also had to commit to foreign investor in wake of economic crises. The same case has been interpreted by various court , including Canadian court and American courts , many jurist have proclaimed a better sense of the stakes needs to be involved , including the dissenting judge – Roberts , the dissenting judge in giving fervent support to the stake of states held that-. “It is no trifling matter.” Many have also noted that for a sovereign nation to subject itself to suit by private parties; we do not presume that any country—including US —should take that step lightly.”
Also, one cannot deny that arbitration itself has became one of the money- minting businesses and investment companies are lured and encouragement with hundred of options of big law firms to sue government. India has experienced one such incident and already based its own policy on the above ground. This failure and manipulation of investment treaty have ranged from terminating BITs, to giving up the ISDS mechanism, and also altering the language of BITS to suitably incorporate public policy concern as evident in state practices. Many countries such as Australia, Bolivia and Venezuela have terminated their treaties. India changed its policy fearing the splash dash of private players.
FDI AND STATE POLICY CONCERN
Traditionally it is seen that treaties have a great potential to “credibly commit” developing countries to investment policies, hence formal trapping of private laws generally effects on private behavior. Thus, developing countries can actually see the investment doubling within year. Though primary result is negligible, the cumulative effect of signing BIT’s is significant. But since there is significant attachment of the Indian policy with some principles of protectionism. There have been great deals of changes done.
Change in definition of investment is one of essential change, though there cannot be a denial that the treaty and clauses are quite formally and elaborately made but one of the key concerns by most of the investors is that there has been some sort of injustice done as there are exclusions of various important customary international law provision in the treaty itself. One bad experience has led to total destruction of the MFN clause, thus shaking the very foundational spirit or pillar on which the concept of liberalism rest.
Article 8.7(4) states that “ treatment “ referred to in article 8.4(1) does not include : procedures for the resolution of investment disputes between investors and states which are provided in other international treaties and trade agreement don’t constitute “ treatment” unless a host sate has maintained pursuant methods and measures.
ISDs have always inter related the principles of Fair and Equity treatment with free and better trade on the lines of UNICTAD and its implication. Hence BIT model treaty of India has disdained from including provision of FET. Generally it is considered as the principle which revolves around providing minimum standards to be applied in treatment of foreign and alien nationals.
To protect her interest, in public policy, Indian model BIT has also included the condition to claim when there is “fundamental breach of due process of law” thus furthermore curtailing the powers of investors to raise fraudulent claims. The effect is to reduce the claim on “ concept of legitimate expectation” which is held by many as part of FET.
The legal literature on doctrine and also the philosophical literature of this doctrine is limited, and hence its interpretation can be said to be in “spectrum” starting from the too broad a interpretation thus boarding the investors way straight towards compensation to interpretation it in narrowly shredded reasonable and justifiable use. Indian is definitely supporting reasonable and justifiable usage of the same. Article 3.1 deals with treatment.
In addition to above concerns , one of the crucial and major concern has also being the usage of “exhaustion of remedies” prior enforcement of any arbitration, generally this is seen by many jurist has allegiance to domestic laws first and then to international arbitration. The duration has been setup for 5 year , 5 year is a long duration of time. Liberals say that such long duration may may shake up the confidence of a company and investor in a state . Moreover, the consequences of delay can also be lethal when investor is in crisis. In such a situation, companies which are certainly more research oriented and are attracted to developing countries in search of mass talent pool may so annoyance and disapproval. Moreover as technology is enhancing , laws also needs to enhance, and in case changes in law, affect the business of investor, it might happen that since the policy is framed keeping government interest in view point, it might result in government failure.
COMPETITION TO GET MORE FDI: COMPETITIVE BITS
One of the significant results increase in the competition between the countries, loose BIT might mean that investor may find other countries more lucrative for investment. China is primarily the main competitor of India and is progressively opening the doors for the investment by loosening her tight grip, thus providing adequate opportunities for countries around the world . It has issued its own version of Investment Industry Guidance catalogue. It has committed in its majority of the treaties with customary principles of International Law.
There are apprehensions that the government might make a state non lucrative for investment. In a study it has already been proved that though the clauses were changed there was no big an impact. This is because, developing countries are huge market for the companies and such market cannot be compromised just for claims. The markets of developing countries are lucrative and also quite much needed as generally with increasing power purchasing capacity, there is a great scope of demanding buyers and consumers.
TECHNOLOGY AND ADR: THE CHANGING FACET
Since there has been quite a change in the ways ADRs are conducted, it is believed that automation and artificial intelligence is going to hit this aspect of law. There are already many firms who are trying to develop their own incubators and their own research software to reach the assiduous task of conflict solving. The future of ADR is certainly going to be one in which there will be less risks of human bias and thus more dependency on the machine. The need for ADR to go more digital is because it will ensure that the need of the current generation is protected.
The coming era will be based on big data analysis and the problem tends to become easy somewhat as the decision making of the larger companies will see a significant shift. The shift will mark with companies relying more on analysis and interpretation of data and less on heretics resulting in decision making which will be algorithm. A sophisticated combination of software and hardware can help applying machine learning to very large data sets. Machine learning help in detection of patterns and learn how to make predictions and recommendations by processing experiences and data , this is just in contrast with receiving programming instruction.
The algorithm also adapt towards new data and experience improve efficiently over time. This can be achieved by various means , there are already huge investment made by private player in the lines of argumentation technique of Lodder and Combined artificial intelligence and Game theory approach of Belluci and Zeleznikowto develop Online –line negotiation
They will come with their own advantage, like meditation occurring at any time along with Adr where parties do not have to meet face to face and things can be sorted on online basis, this is also contra – productive when there has been turmoil history.
Adoption of this technique of ADR in all aspects of Bilateral investment treaty will enhance jurisprudence , the doctrine of stare decision is weak in international law, as it will provide consistency , and the principle of transparency will also maintained by providing that how a decision is arrived and how the finality is reached. Companies like IBM have already stepped forward in this regard. The user of ADR thus are protected as , they don’t have to go to the stress of attending legal decision and also prolonged period of Litigation. To make this more bold it is required that, there should be something which already tell them what will be the result in advance thus making party ready in advance.
There is need of an hour to develop programs in which they provide guidelines that what dispute resolution is beneficial and then advancing to provide them online or other support tool, which are templates, made to provide them opportunity for adequate legal support. To provide litigants with expected outcome of legal outcome is known in the legal negotiation as BATNA. It is pivotal that a generic device be created which in further help the litigants to know the future, the reason being that if you are aware of what will be the result you will be more cautious.
Investment and policy changes are much required and thus arbitration centers can adopt such programs and techniques so that lacunas of human bias, hefty cost and manipulation are rejected. Bilateral treaties which tend not in rigorous but in positive way provide clauses for more scientific approach to deal in future might help both countries as well as investors to provide adequate safeguard. Huge investment is a must.
SUGGESTIONS AND CONCLUSION
Non-inclusion of something like ‘manifest arbitrariness’ in the Indian Model BIT as one of the grounds to challenge the host state’s regulatory conduct leaves a gap in the protection of foreign investment. One of the suggestions is also that both the states should try hard to find out technological and digital oriented arbitrator with less bias, also the long time period which has been given for “exhausting the remedy should be done away with, for guidance some reliance can be placed on the clauses such as that of “Indian – ASEAN agreement” which in deed are progressive. Indian Laws and right of parliament comes from constitution, Socialism is implicit in constitution and directive principle of the government, hence in case of Excel wear vs. Union of India , the Supreme Court interpreted that the court might lean in favor of nationalization but so long as the large private ownership is concerned, the interest cannot be pushed to such an extent so as to completely ignore the interest of other section of society i.e. private owners. Hence balance has to be maintained, but since new treaties are committing more on the principles relating to “ sustainable development, it should be the duty of the government to define what does actually it means, and a proper research should be made, also what are necessary condition in which BITs can be ignored needs a legislative and technical discussion. The BIT also needs to have element of compulsory licensing which is missing and can further used as a major weapon against states. India will survive and gain in 4th Industrial by chasing more liberal, less vague and balanced digital and legislative approach.