Protecting Indian capital in Bangladesh
The political upheaval in Bangladesh, following Sheikh Hasina’s resignation, poses risks for Indian companies there. With Hasina’s pro-India policies gone, new regulatory measures could impact Indian investments in sectors like edible oil and infrastructure. To safeguard their interests, Indian businesses can rely on three legal frameworks: Bangladesh’s domestic laws, contractual agreements, and international law. While domestic laws and contracts offer some protection, international law and investment treaties provide crucial safeguards against adverse regulatory changes.
The dramatic developments in Bangladesh that led to the resignation and fleeing of its former Prime Minister Sheikh Hasina have created a political vacuum and, thus, uncertainty in India’s eastern neighbour. Besides the political and diplomatic fallout of this crisis for India, another significant aspect is how this will impact Indian companies operating in Bangladesh. Indian companies have invested in Bangladesh in sectors such as edible oil, power, infrastructure, fast-moving consumer goods, automobiles, and pharmaceuticals. Despite political opposition, the Sheikh Hasina government rolled out the red carpet for Indian investors and adopted several measures to invite them, such as starting designated special economic zones. Unhappy with India’s alleged support of Ms. Hasina’s regime, her opponents launched an “India out” boycott movement targeting Indian goods. Since Ms. Hasina is no longer in power, the interim or the new government may adopt a hostile attitude towards Indian companies. It might change the existing laws or adopt new regulatory measures that may adversely impact Indian capital. What options do Indian businesses have in such an eventuality?
As Jeswald Salacuse argues, three basic legal frameworks broadly apply to foreign investment. First, the domestic laws of the country where the investment is made. Second, contracts may have been signed between the foreign investor and the government of the host state, or among foreign investors and companies of the host state. Third, the international law contained in applicable treaties, customs, and general legal principles that have attained the status of international law. The Indian companies that have invested in Bangladesh can use the first two legal frameworks to protect their investments from regulatory risks. For instance, Indian companies can rely on Bangladesh’s Foreign Private Investment (Promotion and Protection) Act. However, there are limitations to relying on the domestic law of the host state because it can be changed unilaterally by the state to the investor’s detriment at any time. Likewise, contracts may be of limited value when it comes to challenging the sovereign actions of the state that adversely affect foreign investment. Therefore, the third legal framework, international law, assumes importance.
Source Link : https://www.thehindu.com/opinion/op-ed/protecting-indian-capital-in-bangladesh/article68543791.ece
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