Legal issues involved in transactions in the globalised capital market

Abstract

When a national court is called upon to adjudicate disputes having a foreign element and is required to apply a foreign law, the principles that govern such decisions are known as conflict of laws, or private international law. In order to resolve disputes where two or more systems of law may apply, the forum courts would be wholly justified in applying the principles of conflict of laws to resolve such disputes. Some of the questions that could arise before courts in today's world of globalisation are as follows: What would be the applicable law to a transaction of purchase of shares between two corporate entities both of which are incorporated under the laws of one country when the impact of such transaction leads to a change in the control of other corporate entities located in other parts of the world? Should such transaction be subjected to multiple tests under different legal regimes in order to gain legitimacy? Does the ‘effects’ doctrine take precedence over the rules of conflict of laws? What precisely is the scope of the ‘effects’ doctrine in such transactions, that is to say, primary, secondary or tertiary? How should the prospective investors in the international capital market guide themselves in respect of such transactions in today's world? This paper addresses these questions through an unprecedented landmark case argued by the author before the judges of the Supreme Court of India. The decision on this case clarified the position of the Indian judiciary and set a precedent for the resolution of all such future corporate disputes related to conflict of laws questions in India.