Investments in India are subject to domestic jurisdiction, clarifies FM

Finance minister P Chidambaram has made it clear that all investments in the country are subject to the jurisdiction of domestic legal institutions and that any bilateral investment protection agreement will not alter rules of investment here.

Addressing business leaders in Toronto, Canada, the minister said bilateral investment pacts that India signs with other countries will also be subject to the jurisdiction of domestic legal institutions and that India will not allow these to be subjected to foreign courts or tribunals.

"We cannot allow the highest court of the land to be subjected to any foreign courts or tribunals," Chidambaram said during a question answer session at a breakfast meeting organised by the Canada-India Business Council (C-IBC) in Toronto yesterday.

"Will you allow the Supreme Court of Canada to be subject to jurisdiction of any other court or tribunal?" Chidambaram asked Peter Sutherland, president and CEO of the Canada-India Business Council, who wanted to know the status of bilateral FIPPA treaty.

"We have put Foreign Investment Promotion and Protection Agreement (FIPPA) on hold not only for Canada but other 83 countries too because of two major legal issues: namely right of a foreign investor to sue a sovereign state in a commercial dispute, and jurisdiction. All agreements are under review," the minister said.

This, however, will not affect the progress of the Comprehensive Economic Partnership Agreement (CEPA) and FIPPA, both of which will soon be a reality, he added.

Chidambaram said India and Canada have a longstanding relationship built upon shared values, rule of law and democratic pluralism. The million-strong Indian diaspora in Canada is proof of the strong bilateral relationship, he said.

He said Canadian prime minister Stephen Harper's visit to India in November last year was part of the efforts to expand bilateral relationship. Besides, he said, the two countries have entered into a wide range of agreements over the past three or four years.

During Harper's visit to India in November 2012, the two countries had proposed doubling of bilateral trade to $15 billion by 2015.

Chidambaram said that India has an innate likeness for doing business with countries like Canada, UK, the US and Australia as "we have similar rooted traditions in democracy, judicial independence and business policies".

He said while imports and export match on either side with the total trade at around $5 billion, investments were lagging.

The minister also allayed investor fears of the country's high current account deficit, saying that India's economic growth was robust (9 per cent) between and 2008 and the growth rate which has declined in recent years is expected to gain momentum over the next two three years.

Yet, he said, India was also not immune to global economic crisis. India's high fiscal and current account deficits and inflation are the gifts of the global financial overturns, he said.

"We are committed to fiscal consolidation. Right now the fiscal deficit is 5.3 per cent (of GDP) and we want to reduce it by 0.6 per cent every year till it comes down to 3 per cent (by 2016-17) We have drawn the red line to implement our target," he said.

Nevertheless, the Indian economy is expanding and the country is expected to emerge the seventh largest economy in 2-3 years and the fifth largest economy by 2020, he said.

He called on Canadian investors to participate in India's efforts at infrastructure building as also in sectors like food processing, mining and retail sector as the country strives to get back to a higher, eight per cent, growth path in next two to three years.