International commercial contracts with indian partners: useful tips to safely operate

Following the italian Sace-Simest company’s analysis, India represents the sixth’s export destination market in Asia-Pacific, with an interchange in 2018 worth 4 million euros and with a +6,8% growth forecast between 2020-2022.

Among the strategic sectors of greatest interest for indian operators, there is infrastructure, mechanics, renewable energy, the automotive sector, agri-food technologies and ICT (Information and Communication Technologies).

From a legal and contractual point of view, while concluding an international sale contract among an italian seller and an indian buyer, it is necessary to consider that:

1. India has not signed the United Nations Convention on contracts for the international sale of goods (Vienna, 1980, hereinafter the Convention). As a consequence, when the parties want to apply the Convention to sale contracts among an italian seller and an indian buyer, the advice is to provide a specific clause inside the contract by which the parties choose to apply the Convention and the italian law for anything not regulated by the aforementioned Convention.

This is the only way to apply dispositions concerning form and conclusion of the contract, obligations of the parties, liability in case of non-fulfillment, parameters of conformity of the goods and consequent deadlines for reporting any defects;

2. India instead adhered to the New York Convention of 1958 on the recognition and enforcement of international arbitral awards. For this reason, the contracting companies will be able to consider resorting to arbitration as a method to resolve disputes as an alternative to the national court, always provided that the economic transaction justifies the costs. For further information on the pros and cons of this choice and on the provision of an arbitral clause to carry it out, please refer to the “ABC” on our blog on international arbitration;

3. in the event of a dispute before the Indian judge, the justice system requires quite long time, about 1445 days, for the conduct of a trial of first instance on the merits, including the related executive phase, compared to the about 590 days for high-income OECD countries. The costs are higher (about 31% of the value of the case compared to 21.5% recorded in other countries) and the quality of the proceedings is good, considering also the presence of courts specialized in commercial cases;

4. with regard to the discipline of the relationship between the parties and the possible recognition of a goodwill indemnity towards the agent/distributor, there are no provisions in the Indian national law establishing the obligation to pay it, thus leaving to the parties the freedom to provide or not for this indemnity through the drafting of a specific contractual clause.

Marcello Mantelli
Avvocato in Milan and Turin

#internationalcontracts #internationalsale #internationaldistribution #focusIndia #goodwillindemnity #internationaltrade

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