Word count. The first test of simplicity is the word count. The 1993 Scheme (paragraphs 1 to 11) had 2984 words, while the new 2014 Scheme (paragraphs 1 to 11) has 1659 words – a reduction of 44.4% in usage of words. However, this difference is overstated as the previous Scheme dealt with FCCBs also while the new Scheme does not.

Readability.  The 2014 Scheme wins clearly on reliability.

Structured document. For a given word limit, a well structured document is more comprehensible. The 2014 Scheme follows the logical sequence of a depository receipt transaction. The 1993 Scheme was a haphazard mess.

Use of examples. When drafting the Indian Penal Code, Thomas Babington Macaulay intentionally included many terse, exemplary cases to illustrate the application of a provision. The Justinian Code and writings of Roman jurists persuaded him to make clear the legislative intent: ‘they are cases decided not by the judges but by the legislature, by those who make the law, and who must know more certainly than any judge can know what the law is which they mean to make‘. This unusual innovative feature of the Code earned the praise of John Stuart Mill, who wrote:  ‘besides the greater certainty and distinctness given to the legislator’s meaning, [it] solves the difficult problem of making the body of the laws a popular book, at once intelligible and interesting to the general reader‘. The 2014 Scheme includes examples which clarify the law.

Minimal set of defined terms. The 2014 Scheme uses a standardised set of defined terms. For example, it strictly uses a defined term – ‘international exchange’ – on listing institutions. In contrast, the 1993 Scheme used three different terms to explain listing institutions;  `overseas stock exchanges’, `over the counter exchanges’ and `book entry transfer systems’. None of them were defined.

Principles-based definitions. With the rapid development of technology, the concept of an `exchange’ itself has evolved substantially. To make the law neutral to such evolution, the 2014 Scheme is technology-neutral and principles-based in its definition of `international exchange’.

Rationale statement. Finally, there is the backdrop of the drafting intent and rationale of the Scheme. The 1993 Scheme was not backed by a document articulating what was sought to be done. The 2014 Scheme is accompanied by the Sahoo Committee Report which performs this function. When faced with litigation in the future, practitioners and judges will be able to use this document to reduce legal risk.

The Indian system of capital controls comprises the FEM Act, regulations under FEMA, RBI circulars, etc. The 1993 Scheme is representative of the mess that is the Indian system of capital controls. The cost of doing business in India is being greatly raised by the badly thought out and badly implemented capital controls that are all over the landscape.

This is one area where it is dificult to make progress.