Intellectual Property Law

Investment Treaty between Germany and India

By Martha L. Arias

Free trade agreements, economic blocks, investment treaties, and like agreements signed among nations are vital for e-commerce activities.  Companies seeking to reduce overhead and other operation costs are setting offshore e-commerce or brick-and-mortar businesses in those nations that offer better terms for their dealings. Thus, e-commerce entrepreneurs are in constant search of this type of information essential for their business? growth. This article offers information about the investment treaty signed between Germany and India in 1957, which is still in effect.

On September 19, 1957, Germany and India entered into an investment ?guarantee agreement,? 8 U.S.T. 1442, T.I.A.S. 3900, 290 U.N.T.S. 175, to encourage German private investment in India.  This agreement is still in effect and its most recent amended was introduced on December 7, 1959, 10 U.S.T. 1997, T.I.A.S. 4368, 361 U.N.T.S. 366. This agreement was signed at a time when the government of India launched a campaign to promote and welcome private foreign investment; particularly, in those industries that helped develop their national plans.  Indian foreign investment policies included, and still include, easy transfer of profits, interests, dividends, royalties, and repatriation of the proceeds of liquidation.  In contrast, the government of Germany was promoting German private investment abroad and, to this end, it offered loans and tax concessions.  

The investment guarantee treaty between Germany and India provides the following benefits to German investment in India, including investment from Berlin, provided that those investments operate in accordance with the Indian laws.

(1) Germans investors will not be subject to treatment less favorable than that afforded to other foreign investors in similar circumstances;

(2) Germans are allowed to transfer, after payment of taxes, interests, dividends, and royalties derived from their investments;

(3) The proceeds of a total or partial liquidation of a German investment in India may be transferred to Germany without undue delay;

(4) The India government states that it is not its intention to nationalize or expropriate approved foreign investment; this will only be allowed based on practical considerations and national interest.  In such a case, the government of India will pay the German investor a fair and equitable compensation and allow its transfer without undue delay;

(5) The rate of exchange for money transfers will be the rate for current transactions according to the provisions of the International Monetary Fund;

(6)  The government of India will grant the necessary permits to German nationals whose training or experience are required by an investment; except in cases against public order, security, public health, or morality. 

The Indian Capital Issues Control Act, the Foreign Exchange Regulations Act, the Industries (Development and Regulation) Act, and the Companies Act govern German investment in India. An investment is approved by the Indian government when it satisfies the requirements established by these laws.   If further requirements must be met, the government of India would expressly notify the government of Germany.

Full post as published by IBLS Internet Law Blog on November 24, 2009 (boomark / email).