Supreme Court Justice B.V. Nagarathna recently emphasized the need to establish an Inter-Ministerial Forum to address high-stakes investment arbitration disputes in India. She suggested that instead of different ministries handling investment disputes independently, a collaborative and strategic approach should be adopted through this forum.
Justice Nagarathna’s Recommendation:
"When a dispute arises, ministries in this inter-ministerial forum should take it up as a joint venture rather than addressing it individually. Building a consensus at the initial stage and strategizing early is crucial."
Justice Nagarathna made these remarks during the inauguration of the Post Graduate Certificate Diploma Course on International Commercial and Investment Treaty Arbitration at NLU Delhi. Former Supreme Court judge Justice Indu Malhotra and Finance & Corporate Affairs Minister Nirmala Sitharaman were also present at the event.
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Justice Nagarathna stressed the need for capacity building in international investment arbitration, as India has often relied on foreign law firms for high-stakes investment disputes, despite having a strong legal talent pool.
"Relying on foreign legal firms not only increases government expenses but also places a financial burden on the country. If we train domestic legal professionals, India can handle such disputes more effectively."
She highlighted that NLU Delhi's course on international arbitration would help develop expertise in this field, reducing India's dependence on external legal resources.
India signed its first Bilateral Investment Treaty (BIT) with the UK in 1994, followed by agreements with 88 other countries. While these treaties were initially designed to provide fair treatment and neutral dispute resolution mechanisms, Justice Nagarathna pointed out the need for continuous reforms.
She cited the 2011 White Industries v. India case, where India lost due to delays in its judicial system.
"India’s legal system serves over 1.4 billion people. International arbitration decisions must consider this reality before making judgments against the country."
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To address such concerns, India introduced the 2016 Model BIT, terminated 77 older treaties, and signed Joint Interpretative Statements with nations like Bangladesh, Colombia, and Mauritius to limit broad tribunal interpretations.
Justice Nagarathna expressed concerns over cases where foreign investors challenge government policies, which could hinder public interest decisions.
"Foreign investor disputes challenging government policies taken in the public interest raise serious concerns. They question the legitimacy of the dispute resolution process itself. There must be a balance between investor rights and a country’s sovereign interests."
She referred to cases like Philip Morris v. Australia and Vattenfall v. Germany, where corporate entities challenged national regulations on tobacco control and nuclear energy policies.
Justice Nagarathna highlighted the CDC v. Republic of Seychelles case, where Seychelles, with a small population of 80,000, struggled to defend itself against corporate claimants, resulting in a significant financial burden.
"Small nations often lack the legal and financial resources to fight such disputes. Developing countries must build domestic legal expertise to protect their economic interests."
She recommended that Chief Justices of High Courts send judges for specialized training in investment arbitration to enhance their ability to handle such disputes.
"Training initiatives like this will not only build confidence among legal professionals but also help strategize better in future disputes, ultimately safeguarding India's financial interests."
