The arbitration dispute between Tata Sons and erstwhile telecom joint venture partner NTT DoCoMo is overshadowing India’s growing attractiveness for Japanese FDI. At the heart of the complex dispute is the sanctity of contracts, which is non-negotiable for foreign investors.

After a three-year fight, the new chairman of the Tata Group, N.Chandrasekaran, indicated the group’s willingness to settle by buying back DoCoMo’s 26.5% stake in a failed mobile phone venture. In 2016, the London International Arbitration Court asked the Tatas to pay $1.18bn to DoCoMo, which then filed for the enforcement of award in the Delhi High Court. But on March 8, the Reserve Bank of India told the court that Indian rules bar foreign investors from exiting at a prearranged price.

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Japanese investors are concerned about abrupt changes to India’s rules as NTT DoCoMo had invested according to these rules. “I am worried the abrupt change in those [rules] by the RBI could make the Japanese private sector look at DoCoMo case sympathetically,” said Japan International Cooperation Agency’s chief representative, Takema Sakamoto, according to India’s Business Standard.  

Also of concern to Japanese investors is another high profile dispute between the promoters of Indian pharma giant Ranbaxy Laboratories and Daiichi Sankyo. Daiichi acquired Ranbaxy in 2008 for $4bn but later sold it after Ranbaxy had to pay a huge fine to the US Food and Drugs Administration.

In April 2016, a Singapore tribunal awarded $385m to be paid to Daiichi because the promoters had concealed or misrepresented information regarding USFDA and Department of Justice investigations when selling Ranbaxy. The promoters appealed against this order in the Delhi High Court, saying “substantive objections” exist under Indian arbitration law to make the order unenforceable. 

These adverse developments come just as India has begun to attract larger investment from Japan: equity inflows from Japan rose fourfold to $4.2bn in April-December 2016, compared to $1.1bn in April-December 2015, according to the Department of Industrial Policy and Promotion.

N Chandra Mohan is an economics and business commentator based in New Delhi.