US to India · Contracts and dispute resolution
Contracts and Arbitration in India: A Guide for US Companies
Prepared by S U and Company's CA-led advisory team · Published 26 October 2026 · About S U and Company
An Indian subsidiary runs on more paperwork than the incorporation filing alone. The intercompany agreement with the parent supports the tax and transfer pricing position; customer, vendor and employment contracts carry their own stamp duty and local-law requirements; and the dispute-resolution clause in each of them decides how a disagreement actually gets resolved if the relationship goes wrong. Getting these in writing before the first invoice or the first hire avoids most of the trouble that follows.
Quick answer
What contracts does a US-owned Indian subsidiary need, and how should disputes be resolved?
Put the key terms in writing before work starts: an intercompany agreement with the parent, customer and vendor contracts, and employment and IP terms, each under Indian-law advice rather than a US template. Use an arbitration clause that names the seat, the governing rules and the language. India is a party to the New York Convention, which helps a foreign arbitral award be enforced here, subject to the conditions Indian law sets.
1. Which contracts an Indian subsidiary actually needs
| Contract | Why it matters |
|---|---|
| Intercompany services agreement | Supports the transfer pricing position, withholding tax treatment and the permanent establishment analysis for payments to the parent |
| Customer agreements | Sets scope, payment terms, liability, data protection and governing law for revenue-generating work |
| Vendor and landlord agreements | Lease terms, stamp duty and local compliance for premises and suppliers |
| Employment and IP agreements | Confidentiality, IP assignment and notice terms drafted for Indian law — see our hiring and payroll guide |
| Shareholder or investment terms | Governance, funding, transfer and exit rights between the parent and the subsidiary |
Every agreement that touches money crossing the border — services, royalties, loans, reimbursements — should be signed before the first related transaction, not backdated once an auditor or a tax officer asks for it.
2. Writing an arbitration clause that actually works
- Name the seat of arbitration explicitly — it decides which court supervises the process and can intervene if something goes wrong.
- Choose institutional rules, or spell out the appointment process for the arbitrators if you are not using an institution.
- State the language of the proceedings and the number of arbitrators.
- Choose the governing law of the underlying contract, which is a separate question from the seat of arbitration.
- Add a mandatory negotiation or mediation step before arbitration, if the parties want one.
- Check the stamping and signature formalities on the agreement itself, so the clause is not challenged on a technicality.
3. Enforcing an arbitral award
A foreign award from a country India has notified as a reciprocating party under the New York Convention can be enforced in India, subject to the grounds set out in the Arbitration and Conciliation Act, 1996. An award made in India can be challenged on limited grounds under Section 34, and once that window has passed it is enforced like a court decree under Section 36. The grounds most often raised on challenge are public policy, procedural fairness and jurisdiction — none of which are available simply because a party is unhappy with the outcome on the merits.
4. Choosing a seat in India or abroad
Many US parents prefer a neutral or foreign seat for disputes with the subsidiary's customers, while others choose an Indian seat for faster enforcement against assets that are already in India. Both are legitimate choices, and the right one depends on where the counterparty's assets actually sit and on the relative cost and speed of each route — not on a general preference for one jurisdiction over another. Decide this with counsel on both sides before the contract is signed, not during the dispute.
5. What this means in practice for a US parent
- Intercompany agreements should be signed by authorized signatories on both sides, and the terms should match the actual invoices and payments — a mismatch between the paper and the cash flow is one of the first things a transfer pricing review will test.
- Do not assume a US contract template transfers cleanly: stamp duty, data protection and employment terms usually need local changes before the template is usable in India.
- Who controls the subsidiary is a governance question, not an operational one — the Board of Directors manages the company day to day, while the parent controls the board through its shareholder rights to appoint and remove directors. Matters needing parent approval should be written into the Articles or the intercompany agreement, since directors still owe their legal duties to the Indian company itself.
6. Common mistakes to avoid
- Signing an agreement without paying the applicable stamp duty, then finding it inadmissible or its evidentiary weight reduced when it matters.
- An arbitration clause with no named seat and no stated rules, leaving the process to be litigated before it can even start.
- Using a US contract template for Indian employees without adapting it to Indian notice, benefit and IP-assignment requirements.
- No written agreement at all between the parent and the subsidiary, leaving transfer pricing and tax positions without documentary support.
Frequently asked questions
Is a written agreement needed between a US parent and its Indian subsidiary?
Yes. A signed intercompany agreement supports the transfer pricing position, the withholding tax treatment and the legal basis for every cross-border payment, and it should be in place before the first service begins, not drafted retroactively once invoices are already going out.
Can US law govern a contract with an Indian customer?
Often yes for the governing-law clause itself, but certain Indian laws apply regardless of what the contract names as governing law, so the clause should be drafted with Indian-law advice rather than copied from a US template unchanged.
Are foreign arbitral awards enforceable in India?
Generally yes. India and the US are both parties to the New York Convention, and an award from a notified reciprocating country is enforceable in India under Part II of the Arbitration and Conciliation Act, 1996, subject to the conditions the law sets out.
Does stamp duty apply to commercial agreements in India?
Stamp duty applies to many agreements, with rates set by the state in which the document is executed or the property or subject matter is located. An unstamped or under-stamped document can cause real trouble when it is relied on as evidence, so stamping should not be treated as a formality to deal with later.
Is there a time limit for an arbitral award made in India?
A domestic arbitration award must be made within 12 months of completion of pleadings, extendable by 6 months with the parties' consent under Section 29A of the Arbitration and Conciliation Act, 1996. International commercial arbitration is not covered by this time limit.
Which intercompany transactions need to be priced at arm's length?
Service fees, royalties, cost-sharing arrangements, intercompany loans and interest, guarantees, reimbursements, and the purchase or sale of goods or assets between the Indian subsidiary and any group company abroad. Each needs a written agreement and a pricing method that can be defended on review.
What are MAP and an Advance Pricing Agreement?
The Mutual Agreement Procedure lets the Indian and US tax authorities resolve a double-taxation dispute under the treaty. An Advance Pricing Agreement fixes a transfer pricing method with the tax authority in advance for several years, giving certainty on large or recurring intercompany transactions before a dispute can arise.
How S U and Company can help
We help structure and review intercompany, customer and employment agreements for US-owned Indian subsidiaries, and work alongside Indian and US counsel on arbitration clauses and dispute resolution. For the compliance and tax positions these agreements support, see our transfer pricing guide or explore the US-to-India entry guides.
Sources and further reading
- Department of Legal Affairs — the Arbitration and Conciliation Act, 1996.
- UNCITRAL — the New York Convention on the recognition and enforcement of foreign arbitral awards.
- Ministry of Corporate Affairs — company-law resources.