NEW DELHI: Seeking to address a long-pending grouse of overseas investors, govt is all set to amend the model bilateral investment treaty (BIT) to allow for international arbitration one year after exhaustion of local remedies, instead of the current five-year clause that was brought in, amid a spate of challenges by global investors.A cabinet note has been moved by the finance ministry to amend the model BIT put in place a decade ago and it has also proposed to expand the definition of investment from enterprise-based to asset-based, which will include shares and equity instruments that are maintained for five years or more, persons familiar with the discussions told TOI.
Govt plans BIT overhaul, may open door to international arbitration after 1 year
The Centre is looking to provide certain carveouts, which can include aspects, such as subsidies, local govt measures and compulsory licensing used to waive patent rights in cases of public health emergency and other situations. Investor-state dispute settlement (ISDS) can be used as the starting point for BIT negotiations, people in the know said.BITs are international agreements between two countries, establishing terms and conditions for private investment. It provides for national treatment, which in India’s case is post-investment and a dispute resolution mechanism. The first model BIT was put in place in 1993 as govt courted investors from across the globe and eased its FDI rules.In 2015, after facing a record number of ISDS claims and losing a case involving an Australian company White Industries, govt had opted for a revamp of the model treaty to better protect its interests. It resulted in unilateral termination of most of the BITs, which is not acceptable to a majority of the country. In fact, some of the BITs planned with free trade agreements could not be finalised as the countries had concerns.According to Unctad database, since 2018 only six countries have agreed to BITs with India, including Belarus, Kyrgyzstan, Brazil, UAE, Uzbekistan and Israel.India’s recent trade and investment agreements with EFTA nations, led by Switzerland, as well as those with Oman, the UK, and the India-Brazil BIT, provide only for state-to-state obligations and exclude investor-state arbitration. There have, however, been few exceptions. The India-UAE BIT provides for three years of “exhausting local remedies”, while the one signed with Israel has a four-year period.For several months, there was growing consensus within govt on the need to rewrite the model BIT, but it was being resisted by the finance ministry. Two weeks ago, economic affairs secretary Anuradha Thakur confirmed that govt will soon seek cabinet nod for changes to the model BIT. She had also said that govt will seek to ensure adequate protection for Indian investors too.
