Royalty scrutiny will force global smartphone companies, including Chinese firms, to reconsider contracts with patent holders that include terms for stakes paid by regional subsidiaries to avoid investigations by Indian authorities It’s possible, legal experts said.
They said the Enforcement Bureau investigation into Xiaomi India’s royalty payments could have a significant impact on foreign companies, including competing Chinese firms, creating an environment of uncertainty and harming the larger electronics manufacturing ecosystem.
The ED said Xiaomi India’s royalty payments were illegal and violated the Foreign Exchange Management Act (FEMA), and said it should not make royalty payments because it is registered as a reseller.
The ED then froze the company’s bank assets worth more than 5,500 kroner, which Xiaomi India challenged in court. The order was reserved by the Karnataka High Court.