Offshore Outsourcing to India

There are some legal issues on the subject of outsourcing to India and also few worries whether the contract will be honored by the Indian Legal System or not. This article explains briefly about these issues and provides some information on the legal issues in offshore outsourcing.

Intellectual Property and Indian Laws

India has ratified the World Trade Organization (WTO) Agreement, which came into force on January 1st 1995 and has also become a party to the Agreement on Trade Related Intellectual Property Rights. Laws in India are always undergoing amendments, according to the needs of the changing times and in unison with International Laws and practices. India has effected several legislative changes in copyrights, trademarks, designs, patents, and other issues besides enacting new legislations on bio-diversity and geographical indications in the last few years. These measures have drastically reformed Indian laws on Intellectual Property and it is practical and effective too.

International Contract Laws

The national Legal Regime of any single country becomes inadequate to grapple with the situation when contracts transcend national boundaries. At least two systems of law impinge upon the transaction and the rules of Private International Law come into play when the parties to the contract are located in different countries.

The Courts have held that "Proper Law is the law which the parties have expressly or impliedly chosen, or which is imputed to them by reason of its closest and most real connection". In order to ensure the application of a particular legal system to international contracts is to choose a particular law to govern the international contract laws. This law is called the "Proper Law of the Contract". And it is the best way.

The choice of law is important to Indian courts

Though Courts generally honored the law chosen by the parties, the same was limited due to the holding that there should be some "reasonable relationship" between the transaction and the chosen law in the US. This created some uncertainty. This legal issue was fully removed by the New York General Obligations Law, which became effective on July 19th 1984. When the parties in the Contract make an express choice of law, the Indian Courts have always recognized such choice of proper law. According to Section 5-1401 of the said Law, parties are given freedom to select New York as their proper Law regardless of any relation to New York. The choices of law have always been upheld by the Indian Courts even the parties have chosen any law other than Indian Law.

Free choice of laws which govern contracts of Outsourcing parties

The Courts in India have opined that the intention of parties would decide the law of which country would govern the Contract and which Court would have jurisdiction. The parties are free to stipulate their terms of contract and lay down the law by which the Contract is to be governed under Indian Law. Sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments in India.

On the basis of a reciprocal arrangement between India and the foreign country whose judgment is sought to be enforced, then under section 44A of the Indian Civil Procedure code, the said foreign Decree could be executed as if it were a Decree passed by the Indian court without the need to file a Suit. And if there is no reciprocal arrangement between the foreign country concerned and India, then the said Judgment/ Decree can be enforced in India by filing a Suit on the foreign judgment. And this is commonly practiced on the subject of outsourcing.

International Contracts Guidelines

The following aspects are considered important on International Contracts and they are beneficial to safeguard the interests of all the parties.

1. Ensure that the said foreign soil has a similar law on the lines of Section 44A of the Indian Civil Procedure Code if the chosen Law is Indian Law and if Indian Judgment is to be enforced on any foreign soil.

2. It should be ensured that the formal requirements of a place of Contract are fulfilled in all respects if the Contracts are signed in a country which is different from the country whose law is chosen.

3. The place of arbitration and other aspects have to be properly determined if the arbitration is chosen as the method of dispute resolution.

4. An express choice of Law governing the Contracts is considered in the contracts.

5. The legal regime of the Country, whose law is chosen, recognizes the proper law for enforcement.

All these help the issues of the Offshore Outsourcing to India.