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.
Pursuant to ‘trilogue’ negotiations among major institutions of the EU, an agreement on a proposed regulation with respect to artificial intelligence (“AI”) was arrived at in Brussels a few months ago, the text of which may be approved, published, and subsequently enter into force later this year. This is the world’s first comprehensive law on AI (the “AI Act”). According to the current draft, the AI Act should apply two years after its entry into force, likely from the second quarter of 2026.
The broad focus of this new law is a risk-based approach, based on an AI system’s capacity to cause harm. Compared to prior legislative proposals, additional elements of the current agreement include rules on high-impact general-purpose AI models that can cause systemic risk in the future, as well as on high-risk AI systems. The AI Act may set a global standard for AI regulation in other jurisdictions, just like the EU’s General Data Protection Regulation (“GDPR”) did with respect to personal information. Moreover, similar to the GDPR, one of the most important effects of the AI Act will be its extraterritorial scope, involving obligations for non-EU businesses as well.
In a world characterized by geopolitical shifts and heightened national security concerns, the realm of foreign investment is undergoing a profound transformation. Disruptive events, evolving alliances and strategic recalibrations are increasingly influencing how nations perceive the risks and opportunities associated with foreign investment. As international power structures continue to evolve, the rise of new global players – coupled with technological competition in emerging sectors, underscore the need for nations to reassess their foreign investment strategies in alignment with broader geopolitical goals.
In turn, businesses may be expected to not only navigate multiple FDI regimes in the future, but different outbound screening regulations too. Although the final scope of outbound investment review regimes is still being decided, both the US and the EU have indicated that critical technologies which have the potential to advance military and dual-use capabilities, especially in respect of outbound investment into strategic adversaries, will be additionally scrutinized. Accordingly, investors may need to integrate such factors in their due diligence and risk management processes.
‘Deepfakes’, which involve the creation of highly realistic content (images, video, audio) by harnessing the power of artificial intelligence (“AI”), raise important concerns related to misinformation, identity theft, fraud, privacy infringement and electoral democracy – including as recently witnessed in India via incidents involving media personalities and politicians. However, deepfakes also promise exciting possibilities in various fields and business applications, including for personalized marketing, virtual training simulations and operational efficiency.
As of date, India does not have a specific law to regulate deepfakes or AI. However, certain provisions under the Information Technology Act, 2000 and its corresponding rules (together, the “IT Act”) may be invoked by appropriate authorities in this regard, including with respect to potential misuse and related penalties. In addition, new legislation – such as the proposed Digital India Act and the recently published Digital Personal Data Protection Act, 2023, respectively – which, when acting together, remain poised to overhaul the IT Act in its entirety – may introduce bespoke rules on regulating AI and deepfakes in India.
As organizations navigate this transformative techno-legal landscape, the responsible use of deepfake technology – including through a combined adoption of ethical frameworks, transparent policies, security measures, technical collaborations and awareness campaigns – is necessary to ensure a positive impact on the business ecosystem.
S&R Associates presents the fourth issue of its quarterly roundup series on clean energy, covering the months of November and December 2023.
Issue No. 4 comprises regulatory updates on renewable energy and electric vehicles, respectively, including central and state government notifications in this regard, along with India-related updates and international developments from within the reviewed period.
In addition, Issue No. 4 contains a note on the investment viability of innovative and/or clean construction technologies, as published in a Knowledge Brief of the Asia Pacific Real Estate Association (APREA).
India’s stance on AI regulation has grown more sophisticated over the past few months. On the one hand, the country’s unique requirements have been articulated in respect of making vast datasets available for AI training, as well as to enable rapid AI deployment, innovation and growth. On the other hand, including for the purpose of addressing global concerns (some of which have arisen locally pursuant to recent events like those involving ‘deepfakes’), the government may rely on external influence – such as the risk-based approach contained in a recent political agreement on the EU’s AI Act.
With respect to the latter, new national laws, such as the proposed Digital India Act, may soon establish a concrete compliance framework, including in terms of regulating new technologies, protecting digital users from harm, enhancing intermediary liability, promoting algorithmic accountability and transparency, as well as curtailing monopoly, discrimination and bias. Further, recent reports on AI provide a useful blueprint for India’s long-term vision on AI governance, intellectual property, compute infrastructure and ethical considerations.
In India, the regulatory regime for business trusts (InvITs and REITs) has undergone significant changes in 2023.
This note provides an overview of certain key changes to the regulatory regime for InvITs and REITs.
S&R Associates presents the third issue of its quarterly roundup series on clean energy. Here, we cover updates from the period between the months of July and October of 2023.
This issue comprises regulatory updates on renewable energy and electric vehicles, respectively, including central and state government notifications in this regard, along with India-related updates and international developments.
In addition, we provide an overview of carbon credits, including in respect of its market dynamics.
Every year, Indians require 10 million new homes. At the same time, global markets are increasingly focused on sustainability, climate change and ESG-related goals. The confluence of such factors has created various opportunities to employ climate-responsive construction techniques, including through the use of eco-friendly and sustainable material. Relatedly, the interplay of energy-efficient solutions, green-certified buildings, targeted investments and financing, key legislative changes, government incentives and a coordinated regulatory framework, as well as increased digitalization, may change this ecosystem in fundamental ways.
In July 2023, Reliance Industries Limited announced that the board of directors of its indirect subsidiary, Reliance Retail Limited has approved a proposal to reduce its share capital. The proposed reduction involves canceling the shareholding of the minority shareholders of Reliance Retail, making Reliance Retail a wholly-owned subsidiary of its parent company, Reliance Retail Ventures Limited.
This capital reduction is of interest due to the trading of Reliance Retail’s equity shares on the unlisted market. While Reliance Retail’s valuation is based on reports from independent valuers, objections could arise if the minority shareholders perceive the offered consideration as lower than the price in the unlisted market.