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Legal Issues in Outsourcing to India

With the ascend in outsourcing and with more and more global organizations outsourcing business processes and IT services to India, there has been a number of legal issues in outsourcing. Companies outsourcing to India have to face some complex legal issues with outsourcing. If your organization is outsourcing to India, you need to ensure that your organization is aware of the intellectual property protection and the data privacy and protection in India. Before outsourcing to India, also ensure that your organization knows about compliance with applicable Indian laws, enforcing contractual/legal rights in India and dispute resolution procedures. A proficient and experienced Indian law firm can help solve, alleviate, or eliminate these issues.

Subsequent are the various legal issues involved in Outsourcing which can be mitigated with the help of a knowledgeable Indian Law firm:
1. Amendments in Indian Laws
Laws in India are always undergoing amendments, according to the needs of the changing times and in unison with the International laws and practices. India has ratified the World Trade Organization (WTO) Agreement, which came into force on January 1st 1995 and has also become a party to the Agreement on Trade Related Intellectual Property Rights. In the last few years, India has effected several legislative changes in copyrights, trademarks, designs, patents, and other issues besides enacting new legislations on bio-diversity and geographical indications. These measures have drastically reformed Indian laws on Intellectual Property.
2. Laws Governing International Contracts:
When a legal contract has to be made between two countries, the legal regime of any single country becomes insufficient to deal with the situation. Outsourcing brings about two legal systems into the picture and this is where the private international law comes into place. Before you sign a legal contract with your outsourcing provider, make sure that you decide about which law would govern the legal contract. Having an Indian law firm by you side will ensure that the “Proper Law of contract” is applied, before a legal contract is signed.
3. Indian courts uphold choice of law
When you outsource to India, you can choose the law that would govern the legal aspects of the contract. You can also decide which court would conduct the jurisdiction. The sections 13, 15 and 44A of the Indian Civil Procedure Code and Section 41 of the Indian Evidence Act, govern the conclusiveness and enforcement of foreign judgments made in India.
4. Compliance with statutory laws:
Sometimes when the provider is not compliant with statutory laws, you stand a chance of being held responsible for violations of laws or regulations carried out by such providers. Increasing public scrutiny has ensured that customers are morally, if not legally, responsible for their provider's actions with respect to environmental damage, working conditions, etc. Therefore, a legal team can do a background check to ensure that there is no violation of the established laws and in case of default it can help in bringing about the action against the provider.

5. Dispute Settlement

Dispute settlement is yet another legal issue with outsourcing as both the parties are in different countries. There is also the legal issue of where the case will be filed, as the case has to be fought in the country where the case is filed. These two countries would also have two different legal systems. Thus a legal team, while making a settlement contract with your outsourcing provider, will ensure that the system of dispute settlement is specifically mentioned as clarifying the legal aspects in outsourcing and dealing with the problem of dispute settlement can avoid future problems.

6. Taxation

Outsourcing is often influenced by several international and local issues. The taxation policy of India also has a big effect on the offshore outsourcing decision. Before outsourcing, you need to know about the tax implications that you have to deal with. A legal team can well advice you on such matters as this is an important legal aspect to deal with, because different countries have different tax laws.

Additional requirements of an efficient Legal Team:
Outsourcing deals are unique and need careful contracting in which a skilled legal team can be of great help:

  • If you choose arbitration as the means of dispute resolution, this team will ensure that the place of arbitration and other important aspects are well defined in the legal contract
  • In case, you sign the legal contract in India, such a team will make certain that the formal requirements of that place of contract are fulfilled.
  • It will ensure that there is a choice of law which governs the legal contract.
  • It can do proper background check of the provider relating to compliance with laws in order to avoid any legal hassles later on.
  • It can create a final legal assessment that includes schedule of contractual activities

Summary and Conclusion:

The purpose of this article is to make you aware of the risks and pitfalls involved in the analysis and evaluation of third-party service providers, particularly from the security aspect and how can an efficient legal team help you steer clear through these issues. Such a team shall develop a satisfactory analysis and service arrangement and consequently arrive at a decision that is justified through the consideration of all factors, and not the neglect of an unpleasant few.
We hope this article provides you with insightful information to legally and securely outsource your business needs, for any queries or assistance, please contact us at support@prodigylegal.com or use our contact form.

 
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