New Delhi, Sept. 28 -- For foreign capital entering India, the exit deserves as much engineering as the entry. India has spent a decade narrowing what its treaties do for investors, so protection now has to be designed across the structure, the contract and the assets against which relief will one day be sought.
Every cross-border India deal requires efforts of several months on valuation, sector conditions and warranties. The dispute clause is often negotiated last and lifted from the previous deal. That is backwards. If the deal fails, the legal architecture decides whether the investor can bring the right respondent before the right forum, preserve value while the dispute runs, and convert an award into money. Dispute preparedness is a capital-protection decision.
The safety net is thinner than it looks
The instinct that a treaty stands behind every India investment is out of date. India adopted a substantially narrower Model Bilateral Investment Treaty (BIT) in 2015 and began terminating most of its older treaties from 2016: no most-favoured-nation clause, taxation measures excluded, and at least five years pursuing domestic remedies, with a narrow exception, before treaty arbitration. The retrospective-tax decisions that followed in 2020, including the roughly $1.2 billion damages award to Cairn Energy, showed what the old network could expose the State to.
The direction is now softening, though nothing is settled. The Model BIT review announced in the 2025 Budget is nearing finalisation, with a shorter local-remedies period under discussion; the UAE and Israel treaties already use three years and extend to qualifying portfolio investments. The India-European FTA partnership shows the other trend: investment promotion and cooperation, but no investor-State arbitration.
Two consequences follow. First, terminated treaties commonly protect qualifying pre-termination investments for a survival period, so a legacy Mauritius, Netherlands or UK structure can retain protection unavailable to fresh capital. Second, protection cannot be conjured after the fact: denial-of-benefits clauses and abuse-of-process principles can defeat structures inserted once a dispute is foreseeable. A mailbox is not a strategy.
Treaty and contract are different tools, not substitutes. India is not a contracting state to the International Centre for Settlement of Investment Disputes (ICSID) Convention, and in Vodafone and Khaitan Holdings cases the Delhi High Court distinguished investment-treaty arbitration from commercial arbitration under the Arbitration and Conciliation Act. Domestic enforcement of non-ICSID treaty awards, therefore, remains uncertain.
For most private-equity investors, however, the more likely fight is contractual-with a promoter, shareholder or operating counterparty-where treaties may offer no answer.
Draft a dispute system, not a clause
The contract must, therefore, do work the treaty cannot: governing law fixes substantive rights, the seat (say "seat", not "venue") fixes the procedural law and the supervisory court, and institutional rules supply the machinery for appointments, emergency relief and joinder. The clauses must also be aligned across the document suite. A subscription agreement, shareholders' agreement, guarantee and escrow may form one bargain yet contain incompatible dispute provisions, so the fight over forum precedes the merits.
After the Cox & Kings case, whether a non-signatory affiliate is party to the arbitration agreement turns on a fact-specific inquiry into mutual intention. Keep shareholder disputes within arbitrable territory: statutory oppression and mismanagement relief sits with the National Company Law Tribunal, and only separable contractual disputes stay in arbitration; that interaction has to be drafted, not hoped for.
Relief and enforcement follow the assets
Interim protection is often worth more than the award. In Amazon versus Future Retail, the Supreme Court held that an emergency arbitrator's order in a Delhi-seated SIAC (Singapore International Arbitration Centre) arbitration was enforceable as a tribunal order under Section 17. A foreign-seated emergency order has no equivalent direct route; the fallback is independent Section 9 relief from an Indian court, ordinarily available in aid of a foreign-seated arbitration unless excluded. A foreign injunction does not, by itself, stop an Indian bank transfer. The right seat depends on the counterparty, assets and likely enforcement forum.
Enforcement starts before signing. India applies the New York Convention subject to reciprocity: a foreign award can use the Convention route only if it was made in a territory notified by the Central Government under Section 44, and that list is far shorter than the Convention's membership.
The Future Retail case also teaches the harder lesson. Amazon won its emergency award; then Future Retail's finances collapsed and insolvency law intervened. An arbitration clause creates neither assets nor priority. Escrow, share pledges, parent guarantees and transfer restrictions often matter more. And for private-equity exits, an award does not end the FEMA argument: put options, assured-return restrictions and pricing rules may be raised against enforcement. NTT Docomo and Cruz City show that a FEMA objection does not automatically defeat a foreign award: the courts distinguished compensation for breach from enforcement of an impermissible guaranteed return, and refused to let an award debtor rely on its own regulatory default.
Underwrite the exit, not just the entry
Before signing, investors should ask: does a treaty actually cover this structure and for how long? Do dispute provisions across the document suite align? Will an award from the chosen seat qualify for enforcement in India? Is Section 9 access preserved for Indian assets? What security survives insolvency? Will exit mechanics survive a FEMA objection?
In a market that has spent a decade narrowing what its treaties do for foreign investors, the contract is not the fallback but the plan: structure, security and the route to recovery. Dispute diligence, therefore, belongs alongside tax, regulatory and financial diligence at the investment committee stage. By the time a dispute appears on the horizon, several of the most valuable protections can no longer be created.
Jatin Kochhar and Sooraj Sharma are founding partners at Clavius Legal, where they advise on cross-border investments and disputes. Views are personal.
Published by HT Digital Content Services with permission from VC Circle.