Don't panic at Satyam

Author: | Published: 1 Jul 2009

It would be easy for finance counter-parties to panic on seeing the recent decision in Venture Global Engineering v Satyam Computers Services. But though the decision reveals an interventionist approach by the Indian judiciary, it is not such a big cause for concern. While certain drafting changes should now be incorporated in India-related arbitration agreements, it is not necessary to avoid arbitration altogether. Indeed, international arbitration (that outside India), viewed against the alternative of court litigation, is still the most preferable method of resolving India-related disputes for finance counter-parties. It provides quick, neutral adjudication and decisions that are still the most readily enforceable in India.

Financial institutions investing in India need to agree contractual documentation that sets out the full extent of their legal rights and provides an appropriate dispute resolution mechanism if things go wrong. For finance agreements where India-domiciled parties are involved or where assets are located in...