Bilateral Investment Treaty between India and UAE

Bilateral Investment Treaty between India and UAE

News: Recently, The Union Cabinet has ratified the Bilateral Investment Treaty between India and the United Arab Emirates.

Background:
• Finance Minister (FM) set out the government’s official stance on “encouraging sustained foreign investment” and for this, “negotiating bilateral investment treaties”.

What is a BIT?
• BITs are international agreements establishing the terms and conditions for private investment by nationals and companies of one country to another country.
• They set forth actionable standards of conduct that applied to governments in their treatment of investors from other nations, including:
o Treating foreign investors at par with domestic companies
o Fair and equitable treatment in accordance with international law
• It provides a mechanism for dispute resolution whereby an investor has recourse to international arbitration, often under the auspices of the ICSID (International Center for the Settlement of Investment Disputes).

What issues has India faced with BIT?
• Unfavorable international arbitration awards against India forced the government to terminate all BITs with other countries, starting from 2011.
• India received its first adverse award from an international arbitration tribunal in the case of White Industries under the India–Australia BIT. This judgment led to various similar claims raised against the government, asserting the investor’s rights under other BITs.

What did India do?
• The government, in 2016, decided to terminate almost all BITs with trade partners as it saw these awards as a challenge to its sovereign right to legislate taxation-related provisions.
• Later, India initiated the process of renegotiating the BITs in line with its revised BIT model of 2015.

What is the revised Model of 2015?
• The new model aims to provide appropriate protection to foreign investors in India, while maintaining a balance between investor’s rights and the government’s obligations. Since then India has,
o Signed New BITs/Investment Agreements signed with only four countries
o It is engaged in negotiations with 37 countries/blocks.

Standing Committee 2021 recommendations:
• India should focus on signing new BITs with already partner countries, signing BITs selectively in identified priority sectors, and early completion of treaty negotiations
• Ministry of External Affairs should ensure early implementation of the agreement signed with the Permanent Court of Arbitration (PCA), under which an arbitration administered by PCA can be conducted in India and also promoting the New Delhi International Arbitration Centre as a world-class arbitration centre.
• To develop panels of domestic lawyers (and law firms) with the requisite expertise in investment arbitration to represent India.