Legal Issues of
Offshore Outsourcing to India
If you are considering outsourcing to
India, but need some information on the legal
issues in offshore outsourcing or are worried
about whether your contract will be honored by
the Indian Legal System, read on.
Indian Laws
on Intellectual Property
Laws in India are always undergoing
amendments, according to the needs of the
changing times and in unison with
International Laws and practices.
India has ratified the World Trade
Organization (WTO) Agreement, which came into
force on January 1 st 1995 and has also become
a party to the Agreement on Trade Related
Intellectual Property Rights. In the last few
years, India has effected several legislative
changes in copyrights, trademarks, designs,
patents, and other issues besides enacting new
legislations on bio-diversity and geographical
indications. These measures have drastically
reformed Indian laws on Intellectual Property.
Laws
Governing International Contracts
When contracts transcend national
boundaries, the national Legal Regime of any
single country becomes inadequate to grapple
with the situation. When the parties to the
contract are located in different countries,
at least two systems of law impinge upon the
transaction and the rules of Private
International Law come into play.
The best way to ensure the application of a
particular legal system to international
contracts is to choose a particular law to
govern this contract. This law is called the
"Proper Law of the Contract". The Courts have
held that "Proper Law is the law which the
parties have expressly or impliedly chosen, or
which is imputed to them by reason of its
closest and most real connection".
Indian
courts uphold choice of law
When the parties in the Contract make an
express choice of law, the Indian Courts have
always recognized such choice of proper law.
Previously in the US , though Courts generally
honored the law chosen by the parties, the
same was limited due to the holding that there
should be some "reasonable relationship"
between the transaction and the chosen law.
This created some uncertainty. This legal
quandary was fully removed by the New York
General Obligations Law, which became
effective on July 19 th 1984. According to
Section 5-1401 of the said Law, parties are
given freedom to select New York as their
proper Law regardless of any relation to New
York . However, where parties have chosen any
law other than Indian Law, the choices of law
have always been upheld by the Indian Courts.
Outsourcing
parties are free to choose the law that will
govern their contracts.
Under Indian Law, parties are free to
stipulate their terms of contract and lay down
the law by which the Contract is to be
governed. Courts in India have held that the
intention of parties would decide the law of
which country would govern the Contract and
which Court would have jurisdiction. Sections
13, 15 and 44A of the Indian Civil Procedure
Code and Section 41 of the Indian Evidence
Act, govern the conclusiveness and enforcement
of foreign judgments in India . If there is a
reciprocal arrangement between India and the
foreign country whose judgment is sought to be
enforced, then under section 44A of the Indian
Civil Procedure code, the said foreign Decree
could be executed as if it were a Decree
passed by the Indian court without the need to
file a Suit. If there is no reciprocal
arrangement between the foreign country
concerned and India , then the said Judgment/
Decree can be enforced in India by filing a
Suit on the foreign judgment.
Guidelines
to follow while entering International
Contracts
Companies enter into International
Contracts, as they are always profitable. The
following aspects should be considered while
entering into International Contracts, which
would safeguard the interests of all the
parties to the Contract:
• There should be an express choice of Law
governing the Contracts.
• Ensure that the legal regime of the
Country whose law is chosen, recognizes the
proper law for enforcement.
• In cases where Contracts are signed in a
country which is different from the country
whose law is chosen, it should be ensured that
the formal requirements of that place of
Contract are fulfilled in all respects.
• Where the chosen Law is Indian Law and
if Indian Judgment is to be enforced on any
foreign soil, ensure that the said foreign
soil has a similar law on the lines of Section
44A of the Indian Civil Procedure Code.
• Where Arbitration is chosen as the
method of dispute resolution, the place of
arbitration and other aspects have to be
properly determined.
