The United States and India should view one another as important strategic business partners regionally and globally. With a common legal system of British heritage, democratic governance and relatively free market economies, one would think the two countries would enjoy more trade and mutual direct investment in one another than in European and other Asian countries. But they do not.

Indian arbitration has been viewed by USA businesses as unpredictable and slow. Few USA businesses have agreed to arbitration conducted in India by an Indian arbitration forum. The 2015 Arbitration and Conciliation (Amendment) Act aimed to address concerns of the international business community about arbitration in India. It expressly limits the duration of on-shore arbitration to twelve months, with a possible six-month extension. After the prescribed period, the panel’s mandate automatically expires unless the parties appeal to the courts for a further extension. While theoretically sound, these time limits are yet to be tested in practice. It will take time for USA businesses to come to view Indian arbitration as a fair or preferred choice.

Despite these positive signals, India suffers from a legacy perception of the license Raj. Investors face a host of legal and regulatory risks, including foreign exchange, foreign investment restrictions, and corruption. Foreign investments into India are subject to the FDI Policy of the Government of India and the provisions of the Foreign Exchange Management Act (FEMA).