Amazon-Ambani spat tests India’s allure for global cos
MUMBAI: The tussle between two of world’s richest men—Jeff Bezos and Mukesh Ambani—to dominate India’s estimated $1 trillion retail market is testing foreign investor patience with flip-flopping court rulings.
This week saw new developments in Amazon.com Inc.’s legal battle to block Ambani’s Reliance Industries Ltd from acquiring Future Retail Ltd’s assets, in what would be the country’s largest retail-sector deal. Last week, a single judge at a high court in Delhi restrained Future Group firms from selling their assets. On Monday, a set of judges at the court overruled that decision. Amazon can appeal the latest ruling in the country’s Supreme Court.
The case may set an important legal precedent for investors on whether emergency decisions by foreign arbitrators are valid in India. Amazon had petitioned Indian courts with an order from an emergency arbitration court in Singapore that barred Future from making a deal with RIL.
It could also help overseas investors judge the validity of agreements in India, which the World Bank has ranked among the bottom 15% of countries in terms of enforcing contracts, worse than Venezuela, Syria and Senegal.
“Not giving effect to a foreign arbitration award undermines India’s already floundering reputation as a good place to invest and do business in,” said Bharat Chugh, a former civil judge in Delhi and now a lawyer practicing in India’s top court. Speedy enforcement of contracts and foreign arbitration rulings are important for overseas investors when assessing the attractiveness of an investment destination, he said.
Spokespeople at RIL, Amazon’s local unit and Future Group weren’t able to comment immediately on the latest ruling. Future Retail’s lawyers have argued in court that the deal is their only chance to avoid bankruptcy and save jobs.
The rulings in Amazon’s case come after two big foreign arbitration awards against India. In September, an international tribunal said India acted unfairly in a $3 billion tax dispute with Vodafone Group Plc and in another ruling ordered India to return $1.2 billion to Cairn Energy Plc for a similar failure. India has challenged the Vodafone ruling in Singapore.
It’s common for firms investing in India to opt for foreign arbitrations as the judicial process can take years. After an overseas arbitrator makes a decision, companies can seek its enforcement via an Indian court if the opposing side doesn’t comply.