Copyright © 2012, Satya S. Narayan. All rights reserved.The opinions expressed in this presentation are those of the author and not Royse Law Firm.

Satya S. NarayanSNarayan@rroyselaw.comRoyse Law Firm, PC

October 31, 2012

Top 10 Legal Tips on Exporting to India

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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

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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

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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 policyAbsent a written contract:

The U.N. Convention on International Sales of Goods may apply

Courts may determine that Indian law applies

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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

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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

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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

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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

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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

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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

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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

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Resources

U.S. Department of Commerce’ Doing Business in India: 2012 Country Commercial Guide for U.S. Companies http://export.gov/india/build/groups/public/@eg_in/documents/webcontent/eg_in_049379.pdf

Business Portal of India managed by the National Informatics Centre, Government of India http://business.gov.in/default.php

GOI’s 2012 Consolidated FDI Policy along with amending Press Notes http://www.dipp.gov.in/English/acts_rules/Press_Notes.aspx

Reserve Bank of India’s Master Circular on Import of Goods and Services http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7315#B1

GOI’s Directorate General of Foreign Trade’s http://www.dgft.gov.in/

Office of the Controller General of Patents, Designs and Trademarks http://www.ipindia.nic.in/

Case Status (Status of Pending and Disposed by the Supreme Court and High Courts of India www.courtnic.nic.in/

Franchising Association of India http://www.fai.co.in/

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Questions?

Satya S. NarayanE-mail: SNarayan@rroyselaw.com

Phone: 650.521.5745