Use, Abuse and Avoidance: Foreign Investors and the Legal System in Bangalore

Abstract

This paper considers relationships between 'global' foreign investors and 'local' host state legal systems. It is particularly concerned with investors' willingness and ability to use (for example, by litigating), abuse (for example, by manipulating) or avoid host state legal systems in order to secure their interests against the state, private bodies, and representatives of civil society. The first section reviews existing literature relating to the relationship between foreign investors and national legal systems. This literature includes insights from globalisation theorists, who focus on the depth and speed of the globalisation process and resulting changes in the role of states and their legal systems; and from socio-legal theorists, who focus on the increased impact of non-state actors, such as foreign investors, on legal systems, in particular through the development of non-state law. However, these perspectives do not directly address the issue of use, abuse and avoidance of host state legal systems by investors. Of more direct relevance in this regard is the work of economic development practitioners. They tend to take the perspective of the foreign investor, generally asserting that investors expect and want to use, rather than avoid or abuse legal systems. However, this assertion has rarely been the subject of rigorous testing. The second section presents a case study of relations between foreign investors and the legal system in Bangalore. The case study reveals that, in fact, using the legal system is not a priority for investors. It is concluded that, by exploring foreign investors' relationships with a host state legal system, the Bangalore study fills some of the gap left by globalisation and socio-legal theorists. Its findings also contradict the assertions of the development practitioners, since abuse and avoidance appear to be more popular strategies than use.