Foreign investors often bemoan the epic delays in the Indian legal system, but one Australian mining company has grown so frustrated with the process that it has asked an international panel to hold the Indian government’s feet to the fire.

Australian mining company White Industries is invoking the protections of an international treaty between Australia and India, and hoping that a panel of arbitrators will sanction India for the poor performance of its local courts.

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When White Industries invested in India in the 1980s, the company partnered with a local state-owned enterprise to develop a massive mining complex in eastern India. The investment in India was the largest by an Australian company to that date.

However, when frictions later developed between White and its local partner, the Australian firm asked for arbitration of a series of contract disputes. That arbitration process played out rather swiftly, with arbitrators handing down a final ruling in favour of White in 2002.

The Australian firm then asked the local Indian courts to help enforce the arbitration ruling. But White’s local partner, Coal India, responded by asking the Indian courts to review the arbitration verdict – and to consider overturning it.

That is when matters shifted into the slow lane – more than a decade later, the arbitration ruling remains unpaid and is still mired in the Indian legal system. It is hardly an unusual fate.

Jim Loftis, a partner at the Vinson and Elkins law firm, with experience of representing foreign investors in international disputes involving Indian projects, says that in the past “the Indian courts have been all too willing to exceed the proper scope of review” of foreign arbitration rulings.

While foreign investors have many horror stories about the Indian legal system, Loftis adds that there are signs that judicial attitudes are beginning to change. But, while some investors in India are happy to cross their fingers and hope for further reform, White Industries has taken a more pugnacious tack.

By filing a formal complaint under the Australia–India investment treaty, the Australian firm has now received the attention of the Indian state. Thus far, India has co-operated with the arbitration proceeding and a final hearing is scheduled for September this year.

If arbitrators should rule that White has suffered “unfair” treatment at the hands of the Indian legal system, the government of India could be on the hook for financial compensation.

More importantly, other foreign investors might be emboldened to take their own legal horror stories to panels of external adjudicators, as is permitted under the Australia–India investment protection treaty. If that happens, do not be surprised if India takes some more dramatic action.

Policymakers could quicken their efforts to reform the local legal system. Or, as sometimes happens, the government might take the easy way out: moving to shred the international treaty that grants foreign investors the ability to drag India to international arbitration.

Luke Eric Peterson is publisher of InvestmentArbitrationReporter.com, an online news and analysis service focusing on foreign investment disputes: http://www.iareporter.com