Top Ten Legal Tips on Exporting to India.


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October 31, 2012

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Top Ten Legal Tips on Exporting to India.

  1. 1. Top 10 Legal Tips on Exporting to India October 31, 2012 Satya S. Narayan Royse Law Firm, PCCopyright © 2012, Satya S. Narayan. All rights reserved.The opinions expressed in this presentation are those of the author and not Royse Law Firm.
  2. 2. 1. Identify the right export model for your business  Local presence  Liaison/ Representative office  Branch/ Project office  Wholly owned subsidiary  Channel/ distribution network  Joint venture company  Franchising  Retailing 2
  3. 3. 2. Identify what industry specific regulations apply to you  Work with counsel to identify industry specific regulations/ permissions that may apply to your goods, services and export model  FDI Policies  Industry-wise sectoral caps  Automatic Route v. Government Route  Prohibited Sectors (e.g. Atomic Energy, Gambling and Betting, Agriculture (with several exceptions))  Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by the GOI and the Directions issued by RBI under FEMA  GOI’s Directorate General of Foreign Trade  Foreign Trade Policy and Foreign Trade Procedures  Reserve Bank of India’s Master Circular on Import of Goods and Services 3
  4. 4. 3. Use contracts and don’t just rely on LOIs/ MOUs Written contracts should include business and legal terms:  Sets commercial expectations  Generally, Indian courts respect contracts unless the contract or a contractual term is against Indian law or public policy Absent a written contract:  The U.N. Convention on International Sales of Goods may apply  Courts may determine that Indian law applies 4
  5. 5. 4. Work with counsel to draft effective contracts  Alert! Don’t rely on boilerplate U.S. or Indian contract terms  Provisions may be ineffective under Indian law  Provisions may not address gaps under Indian law  Provisions need to be tailored to your export strategy  At a minimum, contracts should include:  Commercial terms (e.g., payment and delivery terms)  Protections to address intellectual property and confidential information  Risk allocation (e.g., indemnification; warranties and disclaimers; limitations on consequential and other damages; and require insurance)  Force majeure  Termination  Dispute resolution  Governing law 5
  6. 6. 5. If possible, require U.S. federal/ state law for the contract  Indian courts respect the parties’ choice of law for the contract  Choose U.S. federal/ state law or English law where possible  Caveats:  Certain U.S. or Indian laws may still apply (e.g. export laws, FCPA/ anti-corruptions laws, IP laws, antitrust/ competition laws)  Certain contracts will always be subject to Indian law:  Contracts between Indian parties (e.g. contracts between a U.S. company’s Indian subsidiary and its Indian partners)  Contracts with Indian governmental entities  Contracts with Indian consumers/ individuals 6
  7. 7. 6. Protect your intellectual property  Register your key export-related intellectual property assets in India  Require your Indian partners (including the joint venture company) to agree to:  “no contest” terms  confidentiality obligations (note: no trade secret legislation in India)  present assignment of derivative or new intellectual property 7
  8. 8. 7. Require arbitration for dispute resolution  The Problem:  U.S. judgments are not automatically enforceable in India  Indian companies are not averse to litigation  Litigation experience can be frustrating: delays, uncertainty, and corruption  Arbitration is a better alternative; make it a requirement of the contract  India is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958  Caveats:  Reserve court access for IPR and Confidential Information; Indian High Courts grant injunctive relief within 48 hours  Arbitration is not available against governmental entities 8
  9. 9. 8. Be aware of the web of Indian labor laws  Labor laws:  Industrial Disputes Act, 1947  Factories Act, 1948  Applicable state’s Shops and Establishments Act  More than 55 central labor laws and over 100 state labor laws  More stringent than U.S. labor protection requirements (e.g., 200 hours/ year overtime limit, 30 minutes/ 5 hour rest break, etc.)  Companies employing more than 100 workers must obtain government approval before they can fire employees or close down  Post-termination restrictive covenants are void (e.g., non-compete and non-solicitation clauses)  Exception: Non-compete clauses in the context of a sale of business with goodwill for consideration and even then restriction must be reasonable as to time, geography and other limitations 9
  10. 10. 9. Ensure compliance with the FCPA  Extraterritorial jurisdiction of the U.S. Foreign Corrupt Practices Act  U.S. companies liable for acts of Indian subsidiaries and potentially for the acts of its partners if it has knowledge  Comply with accounting and record-keeping provisions of FCPA  FCPA enforced by the SEC and DOJ. In 2010, the SEC’s Enforcement Division created a specialized unit to further enhance its enforcement of the FCPA.  India 95th out of 182 countries in Transparency International’s Corruption Perceptions Index  Anti-corruption best practices:  Due diligence on partners  Regular internal audit  Educate employees, partners and agents  Circulate anti-bribery policies to employees, partners and agents 10
  11. 11. 10. Watch for new Indian legislation  Competition Act, 2002 & Competition Rules, 2011  IT (Amendment) Act, 2008 & Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011  Amendments in 1999, 2002, 2005 and 2006 to the Indian Patent Act, 1970 & Patent Rules, 2003, amended in 2005 and 2006 In the works ….  Companies Bill, 2011 introduced to replace the Companies Act, 1956 11
  12. 12. Resources U.S. Department of Commerce’ Doing Business in India: 2012 Country Commercial Guide for U.S. Companies  Business Portal of India managed by the National Informatics Centre, Government of India  GOI’s 2012 Consolidated FDI Policy along with amending Press Notes  Reserve Bank of India’s Master Circular on Import of Goods and Services  GOI’s Directorate General of Foreign Trade’s  Office of the Controller General of Patents, Designs and Trademarks  Case Status (Status of Pending and Disposed by the Supreme Court and High Courts of India  Franchising Association of India  12
  13. 13. Questions? Satya S. Narayan E-mail: Phone: 650.521.5745 PALO ALTO LOS ANGELES SAN FRANCISCO1717 Embarcadero Road 11150 Santa Monica Blvd., 135 Main Street, Palo Alto, CA 94303 Suite 1200 12th Floor Los Angeles, CA 90025 San Francisco, CA 94105 13