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White Industries v India: A New Era of Indian BIT Challenges

16 March 2012
In a decision that will provoke debate about the scope of the rights provided by BITs, India has been held to have breached BIT with Australia for failing to provide White Industries with "effective means" of enforcing its rights as a foreign investor.

White Industries had been struggling to enforce an ICC arbitration award for nearly a decade in the Indian courts. One of the primary reasons for the extreme delay was the disruption caused by a separate application by Coal India Limited (the original respondent in the ICC proceedings) to have the ICC award set aside in the Calcutta High Court. The tribunal in the White Industries v India arbitration found that there was evidence of a "systemic problem" with the Indian court system which constituted a breach of the obligation to provide an effective means for foreign investors to enforce their rights. Even though the India-Australia BIT did not include such an obligation, White Industries successfully argued that the combined effect of a "most favoured nation clause" and the presence of the "effective means" obligation in other Indian BITs was that White Industries could benefit from the obligation in this case.

This decision has caused much debate about whether India, whose court system is notoriously overstretched and very much in development, should be held to the same standards as other more developed countries. However, the decision of the tribunal raises an important question – will BITs be used as a means of final recourse against (1) unfavourable decisions in the national courts of the host state of their investment; or (2) other delays or obstructions in the progress of their claims through national courts?  The decision has potentially far-reaching implications so watch this space to see how things develop.

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