Global Depository Receipts in India: boon or bane

The Global Depository Receipt (“GDR” or “DR”) is a structured financial instrument denominated in foreign currency and Indian companies issue equity shares/securities underlying the GDR to international investors. Many companies have used GDRs for manipulative and fraudulent practices and the Indian regulator, SEBI has penalised them. This paper aims to evaluate the legitimacy of the GDRs and malpractices associated with them and to find if there is any need for reform in the GDR Scheme, to see if the GDRs are beneficial to the economy or are inherently manipulative instruments and looks at the need to reform the laws governing GDR. The authors have employed the methods, literature review and empirical research. The authors have conducted empirical research of the participants in the Indian GDR industry in April and May of 2021 by way of an online Questionnaire and unstructured telephonic interviews. The study results in the author’s conclusion that the GDRs are legitimate instruments but the participants abused the Scheme and led to malpractices. The authors failed to conclude about the need for reforms in the GDR laws. The paper recommends the suitable amendment of the DR scheme with an intention to plug its loopholes and allow it in foreign jurisdictions with the highest compliance requirements while keeping in mind the cost of such compliance.

Quasar de Valors SICAV SA, Orgor de Valores SICAV SA, GBI 9000 SICAV SA and Alos 34 SL v. Russian Federation

205Jurisdiction — Dispute — Expropriation — Whether jurisdiction under the BIT was limited to the determination of the amount or method of payment of the compensation due for expropriation — Whether the tribunal had jurisdiction to determine that an expropriation had occurred — Whether there was a dispute between the parties concerning the existence of an expropriation — Whether the claimants had to resort to diplomatic protection or municipal courts to establish that an expropriation had occurredMost-favoured-nation treatment — Dispute — Interpretation — Whether investors could invoke the broader dispute resolution clauses of other BITs by virtue of most-favoured-nation treatment — Whether access to international arbitration fell within the scope of most-favoured-nation treatmentInterpretation — Intention — Evidence — Object and purpose — VCLT, Article 31 — Whether there was evidence that the parties to the BIT intended to exclude the determination of expropriation from jurisdiction — Whether the object and purpose of the BIT would be frustrated by excluding from jurisdiction the determination of expropriationJurisdiction — Foreign investor — Legal personality — Whether investment vehicles that lacked legal personality under municipal law satisfied the meaning of investor under the BITJurisdiction — Investment — Depository receipts — Territory — Whether depository receipts constituted an investment under the BIT — Whether depository receipts were an investment made in the territory of the StateAdmissibility — Notice — Whether the claimants failed to give adequate notice — Whether the State was barred from raising a belated objection on the adequacy of notice during the proceedingAdmissibility — Abuse of process — Third-party funding — Double recovery — Whether the claimants had engaged in an abuse of process because their claims were funded by a third party — Whether there was any risk of double recovery from arbitrations arising from the same measuresExpropriation — Taxation — Judicial act — Whether tax levies were arbitrary or discriminatory — Whether the State had prevented a company from honouring its disputed tax debt — Whether tax delinquency was an excuse for seizing assets and transferring them to State-owned entitiesRemedies — Damages — Standard of compensation — Valuation date — Whether compensation should cover the claimants’ proportionate share of an expropriated entity’s market value — Whether compensation had to be assessed at the time when an expropriated entity was removed from the register of companies or at an earlier date — Whether the value of the 206investment could be determined by the price of shares as they would have been traded on the stock market — Whether the date proposed by the claimants as the date of the last reliable stock price was acceptable — Whether a reduction was warranted because the claimants had speculated in distressed stockCosts — Third-party funding — Whether the allocation of costs was affected by the claimants’ funding by a third party — Whether the State’s failure to make advance payments affected the allocation of costs

DIGITAL CERTIFICATE — A NEW TYPE OF SECURITY

Digital certificates are used for securitization of utilitarian digital rights that are restricted in circulation. By introducing this institution, the legislator has not fully settled the issues related to it. In particular, it is necessary to define the procedure for interaction between the operator of the investment platform and the Depository in the accounting process related to the issuance of digital certificates. The owner of a utilitarian digital right that initially receives a digital certificate, according to the author, can be a Depository or an investor. It is possible to form investment pools in order to acquire utilitarian digital rights for their subsequent securitization. The legislator did not define the nature of the subjective civil law on the basis of which the owner of a digital certificate has a digital right. According to the author, this right is the right of ownership. Digital certificates are a type of securities constructed on the model of depository receipts and have features similar to documents of title. According to the author, there are prerequisites for the introduction by the legislator of the possibility of circulation of digital certificates at regulated markets.

The ADR Market and the Effects of ADR Issue on the Underlying Security; a Survey

The present paper exposes the definition and main characteristics of American depository receipts (ADR) and their market. The research discusses the theoretical and practical explanations of the ADR demand by us investors. It also considers, in theoretical terms, the reasons why an international issue would imply changes in the return and variance of the underlying security of ADRS, and comments on the evidence related t to such an issue. The main conclusion of this paper is addresed to the impact on the underlying security following the international listing by middle-sized firms from semi-integrated capital markets.

Short-term Overreaction in American Depository Receipts

In this paper we examine for the first time the short-term predictability of American Depository Receipts (ADRs) in reaction to extreme price movements. Based on an analysis of 2,911 extreme price movements that took place within either normal trading hours or after-hours in the period 2001-2019, we conclude that those extreme returns were on average followed by significant reversals. This response represents an overreaction in prices, which challenges the weak version of the efficient market hypothesis. Price reversals are especially pronounced following extreme returns observed during after-hours, which lends support to the assertion that ADR markets are particularly inefficient during this trading period. These findings carry important implications for both market practitioners and regulators.

Investors’ Attention and American Depository Receipts Pricing: Evidence from Indian Stocks

This paper is an attempt to examine the impact of investors’ attention on returns and the traded volume of American Depository Receipts prices for selected ten Indian Stocks. The Google search volume index has been used as a proxy for investors’ attention in this paper. However, factors such as size and book to market ratio were used to indicate as control variables. The results reveal that investors’ attention variable significantly affects ADRs traded volume, but has no impact on the ADR prices.