28 Aug Our Legal Business with India
During the last Bastille Day celebrations in Paris, the French President welcomed the Prime Minister of India, Narendra Modi, an opportunity for our firm to review our experience of working with Indian lawfirms in New Delhi and Mumbai.
Several examples of legal cases between France and India were handled by Clerc Avocats:
In the first example, the question was to determine the risks in terms of Permanent Establishment (PE), for a French company that had set up a liaison office ( LO) in India and employed an Indian citizen to promote sales in the region. The main risk was that the company would be taxed in the same way as a company that resides in India. Although the OECD Model Tax Convention on Income and on Capital ( 2017) and the Franco-Indian Double Tax Avoidance Agreement (1992) include “an office” in the definition of PE, according to Reserve Bank of India’s regulations confirmed by Indian caselaw, a LO that only performs communication functions without carrying out any commercial activity cannot be considered as a PE in India. It was also relevant to seek the advice of an Indian chartered accountant, to determine whether our client was exposed to any risks because of the different interpretations of the notion of “entering into contracts” that coexist, since this notion makes it possible to determine the existence of a PE, since entering into a contract testifies to the exercise of a commercial activity.
In the second case, the issues involved an Indian company we assisted that was acting as an intermediary for a French company in India and claiming the recognition of the mandate business relationship between them (which was crucial in determining the scope of their responsibilities), and the recognition of the status of commercial agent for an Indian Agent, without any commercial agent contract. The mandate relationship was recognized, and according to the definition of “commercial agent” given by the French Commercial Code, the Indian agent was able to be recognized as such in the absence of any commercial agency contract, since such a contract was not a necessary condition for the recognition of this status.
A further example was the challenge to obtain a bank guarantee (BG) from an Indian company whose financial capacities were uncertain and who had to act as an intermediary for a French company buying goods from a south American company. Our client had to pay a considerable deposit to the South American seller. Thus, to secure the transaction, we advised it to obtain a BG representing the same amount as the deposit paid, from the Indian company. Obtaining this guarantee was essential, as the Indian partner was a sole proprietorship and we were unable to obtain any further information about it, due to the absence of a company register where information about sole proprietorship can be found. Thus, we proposed a model bank guarantee based on the Uniform Rules for Demand Guarantees (URDG) proposed by the International Chamber of Commerce, to the potential Indian co-contractor who did not accept the request due to insufficient financial capacities.
The risks associated with a failed transaction were therefore avoided for the French company.