A revision has been made to India's Model Bilateral Investment Treaty (BIT)

Regarding the Bilateral Investment Treaty (BIT)

The BIT, also known as International Investment Agreements (IIAs), was created by the United Nations Conference on Trade and Development (UNCTAD) as a legal framework to protect foreign investments.It is a win-win arrangement whereby two countries support and protect private foreign investments in each other's nations.

Among the few guarantees it establishes between the two countries regarding the treatment of foreign investments are: Protection From Expropriation: Limiting each country's authority to confiscate foreign investments within its borders; Fair & Equitable Treatment: Adhering to international law; and National Treatment: Treating foreign investors on an equal basis with domestic companies.BIT typically includes dispute resolution processes such as investor-state dispute settlement (ISDS) and state-to-state dispute settlement (SSDS).

Why Make a New Revision?

Limited Definition of Investment: The Model BIT (2015) limited the definition of investment to businesses that carry out major business operations in India and excluded indirect investments and portfolio investments.

Overly protectionist and deterring FDI: Many foreign investors feel that India's BIT framework is unfavourable, which has prompted a reexamination to find a balance between national interests and investor protection.

Geopolitical shifts and trade agreements: As India negotiates trade agreements with the EU, UK, and Canada, a more equitable BIT is essential for fostering economic cooperation.

Challenges with Investor-State Dispute Settlement (ISDS): The 2015 Model BIT significantly deters foreign companies from pursuing international arbitration by making it more difficult for investors to do so.

India's Current Strategy

Chief Economic Adviser V. Anantha Nageswaran announced that India's new model Bilateral Investment Treaty (BIT) would be adjusted to take into account the evolving global investment environment while maintaining India's regulatory latitude and sovereign rights.

Finance Minister Nirmala Sitharaman said the BIT model would be revamped to encourage steady foreign investment and make it more investor-friendly.

Expected Changes in the Revised Model BIT: More Fair Investor Protections While maintaining regulatory independence, India may expand the scope of investment protections and include a restricted MFN clause.It avoids treaty shopping and aims to attract new investors.

Redefining the Exhaustion of Local Remedies Clause: The stringent five-year time limit for exhausting local remedies may be relaxed to allow for international arbitration.A "fork-in-the-road" mechanism could be introduced to allow investors to choose between arbitration and domestic courts.

Stronger dispute resolution processes: India is most likely to review its ISDS policies.A revised arbitration process, possibly incorporating a mediation framework or a standing appellate authority, could be put into place to improve the predictability of dispute resolution.

A well-drafted Bilateral Investment Treaty (BIT) can have a big impact on India's economic development by boosting investor confidence, attracting foreign capital, and adhering to international standards.By providing a stable and secure business environment, a revised BIT can reassure foreign investors and encourage them to make investments in India.

In turn, increased foreign investment boosts employment, economic expansion, and India's standing in global trade.Additionally, updating the BIT ensures that India's investment laws remain competitive and adhere to international best practices.BITs should represent India's national interest, particularly with regard to regulatory authorities, and should be negotiated independently rather than as part of Free Trade Agreements (FTAs).