Foreign Investment in Nuclear Energy in India

Foreign Investment in Nuclear Energy in India

Nations across the globe have announced their net zero targets and other climate action commitments. Each country is pursuing its own pathway to achieve the net zero goal considering the resources available to it. In this background, in December 2023, the Government of India announced that it has initiated steps to substantially increase India’s nuclear power capacity.
This note provides an overview of the current legal framework for private/foreign investment in nuclear energy in India and the increased level of screening for foreign investment globally in the energy sector.


India's Satellite Communication

Regulatory Shifts in India’s Satellite Communication Landscape

There is a rising interest in satellite-based connectivity in the Indian market among internet service providers. Eutelsat OneWeb India, Jio Satellite Communications, Elon Musk’s Starlink and Amazon’s Kuiper are in the process of obtaining the requisite licenses to provide satellite communication services in India. Satellite communications represent an inevitable technological development in response to a continued demand for better network quality and higher capacity.
In this background, the Telecommunications Act, 2023 (“Telecommunications Act”) which received the President’s assent on December 24, 2023 and provides for administrative allocation of satellite spectrum as well as liberalization of the FDI policy applicable to the space sector further spurs the gaining momentum in satellite-based communication technology in India. This note explores the regulatory shifts in the Indian satellite communications landscape.


Capital Gains and Beneficial Ownership Test

Indian Tax Treaties: Capital Gains and Beneficial Ownership Test

India’s double tax avoidance agreements (“DTAAs”) with certain countries (for e.g. Singapore, Mauritius and the Netherlands) provide that the capital gains on sale of shares is taxable only in the resident country of transferor and no tax is payable in India. However, the tax authorities have disputed the benefit available under the DTAAs by applying the “beneficial ownership” test. Further, they have also argued the sufficiency of tax residency certificate (“TRC”) to claim such benefit. In this note we analyze these aspects in light of the decision of Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd., appeal against which has been recently admitted by the Supreme Court.


Legal considerations of investing in india

Investing in India: An Overview of Legal Considerations

Foreign investment is a key contributor to India’s growth story and India continues to consistently experience growth in inflow of foreign direct investment (“FDI”). The Government of India has announced that the provisional figure of FDI inflow into India for the financial year ended March 31, 2023 was USD 71 billion and according to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, India remains a favored destination for global investors.
In this note we discuss certain key legal considerations for a foreign investor investing in India.
 


Compulsorily Convertible Debentures

Compulsorily Convertible Debentures:
Whether ‘Debt’ or ‘Equity’?

Compulsorily convertible debentures (“CCDs”), as the type suggests, are debentures that are compulsorily convertible into equity shares. CCDs first became prominent in the foreign direct investment (“FDI”) context in 2007 when Indian foreign exchange laws expressly recognized them as the only type of debentures that Indian companies could issue to raise FDI. The reason to disallow other types of debentures for FDI purposes was to curb debenture issuances to foreign investors in the guise of equity. Since the foreign exchange laws had established a FDI regime for equity instruments and a separate external commercial borrowing (“ECB”) regime for debt instruments, it was felt that Indian companies were bypassing the ECB route by issuing hybrid debt instruments under the FDI route. Thus, CCDs have been regarded as equity instruments for FDI purposes.
In November 2023, the Supreme Court of India (“Supreme Court”) delivered its judgment in IFCI Limited v. Sutanu Sinha that dealt with the question whether CCDs are to be treated as ‘debt’ or ‘equity’ in a different context. This note analyzes the Supreme Court judgment and the ‘repayment of principal’ test that courts have consistently applied to determine whether convertible debt instruments are regarded as ‘debt’ or ‘equity’.


Disclosure Requirement SEBI Listing Regulations

Assessing the Sweep of a Recently Introduced Disclosure Requirement in the SEBI Listing Regulations

On June 14, 2023, the Securities and Exchange Board of India (“SEBI”) notified certain amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”). The amendments are designed to strengthen corporate governance in listed entities by enhancing shareholder suffrage and disclosure of material events. Notably, the amendments introduced a new Regulation 30A that is to be read with a newly inserted Clause 5A of Paragraph A of Part A of Schedule III to the SEBI Listing Regulations (“Clause 5A”). Regulation 30A mandates shareholders, promoters, promoter group entities, related parties, directors, key managerial personnel, and employees of a listed entity or of its holding company, subsidiary, or associate company (“Specified Persons”) to notify the listed entity as and when any of them enters into agreements covered by Clause 5A (“5A Agreements”).
This note highlights the key features of Clause 5A and outlines certain practical considerations for Specified Persons and listed entities.


Data Embassies in India

Data Embassies in India

In her Budget speech earlier this year, India’s Finance Minister had stated that the government would facilitate the establishment of ‘data embassies’ for the benefit of countries looking for digital continuity solutions. Such data embassies may be set up under the auspices of GIFT City in India’s first IFSC, located in Gujarat.
Accordingly, in order to allow countries and international companies to set up such embassies, the government may formulate a bespoke policy soon. To that end, it may notify specific norms, such as with respect to: (i) what a data embassy constitutes, (ii) the size and specifications of the data center necessary for such purpose, and (iii) whether data embassies can be virtual.
Further, such a policy will be expected to offer diplomatic immunity with respect to Indian regulations as far as the sovereign and commercial digital data of establishing entities is concerned. While it is likely that the lure of regulatory immunity will promote significant investment in India’s data industry – especially from technology infrastructure providers and cloud storage companies – India’s data embassy policy may allow for the storage of non-personal data only.
On the whole, this initiative appears to be part of a larger plan to build a trusted data storage ecosystem in India. As a novel device under public international law, data embassies have only recently become a viable option, especially among vulnerable states that face multifaceted uncertainties and threats. The idea of storing backups of critical state information in data embassies abroad – especially for the purpose of operating such databases from a secure, off-site center outside a state’s own borders – implies that such information remains available for retrieval in the event of a disaster or other emergency.


Data Embassies

Readying the Law to Host ‘Data Embassies’ in India

Consistent with India’s stated aims of becoming a data storage and cloud computing hub, as the country seeks to encourage foreign governments and businesses to establish ‘data embassies’ at Gujarat’s GIFT City, a bespoke policy may soon be formulated along the lines of Bahrain’s cloud law, as well as for the purpose of defining a ‘data embassy’ appropriately such that its underlying and/or associated infrastructure qualifies for diplomatic protection under international law. Alternatively, such entities could be instrumentalized through customized bilateral agreements that re-interpret the Vienna Convention (like Estonia and Monaco signed with Luxembourg in 2017 and 2021, respectively) in respect of granting regulatory immunity to potentially both personal and non-personal information (as if it were physical premises), including with regard to non-sovereign commercial digital databases.
Clause 17 of India’s current draft of the Digital Personal Data Protection Bill, 2022 (“DPDP”) permits digitized personal data to be stored overseas, albeit at locations that satisfy the government in terms of political and protectional adequacy. In that regard, a revised iteration of DPDP (or rules framed thereunder) may subsequently include the principle of reciprocity in a way that foreign state or private entities are able to use local cloud ecosystems through state-of-the-art data centers located inside an Indian SEZ, including for the purpose of storing copies of critical government or business information for continuity, backup, and/or recovery-related reasons – in case the main servers back home get compromised – including on account of sustained denial-of-service attacks, a natural disaster, full-scale military invasions, or any other national emergency. 
Nevertheless, since DPDP deals exclusively with digitized personal data, if India’s data embassy policy envisages the storage of non-personal information only, it may need to rely on a different legislation – such as the proposed Digital India Act. Meanwhile, although certain Tier 3 and Tier 4 data centers with business continuity and disaster recovery functions are already operational at GIFT City, data embassies may require a new approach by leveraging diplomatic agreements bolstered by cloud technology solutions. Accordingly, India may want to develop a separate legal framework for the purpose of being perceived as a reliable host with respect to sensitive foreign databases.
With this background, this note examines how countries and companies (especially vulnerable and/or at-risk ones) that want and/or need digital continuity solutions may evaluate available options – given policy, legal, and logistical constraints in this regard.


Navigating BRSR

Navigating BRSR: Concerns and Opportunities  

In February, SEBI released a consultation paper on disclosures, ratings, and investing related to ESG, pursuant to which an assurance-driven reporting regime based on key ESG attributes (“BRSR Core”) may be introduced soon.
BRSR Core is intended to represent a focused subset of the Business Responsibility and Sustainability Reporting (“BRSR”) framework, which SEBI had introduced in May 2021 as a voluntary disclosure regime in lieu of the erstwhile Business Responsibility Reporting (“BRR”) paradigm. The main motivation behind introducing the BRSR framework was to ensure quantitative, standardized disclosures on ESG-linked parameters. While until FY 21-22, the top 1,000 listed companies in India by market capitalization could make disclosures under this framework on a voluntary basis, such disclosures are compulsory from FY 22-23.
This article provides an overview of category-wise BRSR compliance requirements.  Further, it highlights some of the benefits and opportunities, along with potential legal risks, associated with such disclosures. The article also discusses some of the concerns and innovations related to the BRSR Core framework, including in light of SEBI’s proposals with respect to adjusting intensity ratios for country-level purchasing power parity and extending disclosure requirements to corporate supply chains.


Data Centres in India

Data Centres in India: Opportunity and Incentives

In the backdrop of India’s growth story as a major IT-ITes hub in the last two decades, the Indian data centres industry is now emerging as the next attractive opportunity for investors and developers.  The demand for data centres in India is being driven by the need for data storage given the Government’s Digital India and data localization policies, increased data consumption and 5G roll-out which is expected to enable adoption of data intensive technologies such as internet-of-things (IoT) and artificial intelligence (AI).  The proliferation of data centres in India has also created growth opportunities in various sectors of the Indian economy, including real estate, manufacturing and renewable energy.
While the draft national data centre policy is yet to be implemented, various Indian states have adopted their respective state data centres policies to attract private investment in this capital and technology intensive sector.  In this article, we compare the incentives offered under data centre policies adopted by certain Indian states which have received major investments in the data centre sector.