India has signed bilateral investment treaties (BITs) with several countries to promote and protect foreign investments. However, in recent years, India has taken steps to reform its BIT regime due to concerns that existing treaties favor foreign investors over national policy objectives.
India’s BIT Regime
- India signed its first BIT with the United Kingdom in 1994. Since then, it has signed 83 BITs, of which 72 are in force.
- BITs provide protection to foreign investors against expropriation, give them access to international arbitration in case of disputes with the host country, and offer assurances regarding repatriation of returns on investments.
- Over 2015-20, foreign companies have used BITs to file claims worth over $10 billion against India related to retrospective taxation, cancellation of licenses, etc. This led to concerns that BITs constrain India’s regulatory powers.
Recent Policy Changes Regarding BITs
In 2016, India unveiled a revised Model BIT to balance investor protections with the government’s regulatory powers. Key aspects include:
- Narrower definition of investment covered under BIT protection
- Specific exclusions for matters like taxation and Intellectual Property Rights (IPR) violations from BIT purview
- Refined clauses regarding expropriation and investor-state dispute settlement
- Removal of Most Favored Nation (MFN) treatment
Additional Key Aspects
- India gave notices to 57 countries to terminate existing BITs and sign new pacts based on the revised Model BIT.
- As of 2024, India has allowed 23 BITs to lapse, including with Canada, Germany, and Sweden.
- India signed updated BITs with Belarus (2018) and Kyrgyzstan (2021) incorporating provisions of revised Model BIT.
Ongoing Concerns Regarding India’s BIT Regime
- Uncertainty for existing foreign investors whose BITs have been terminated on whether they will get protection under new pacts
- Slow progress in signing updated BITs leading to investment protection gaps
- Questions on consistency of India’s BIT regime with its stated commitment to rule of law, predictable regulation
Comparison of Key Provisions in Old and New Indian Model BITs
| Provision | Old Model BIT | New Model BIT |
| Definition of Investment | Broad, included IPRs | Narrower, excludes IPRs |
| National Treatment | Mandatory | Not mandatory |
| Most Favored Nation Treatment | Mandatory | Not included |
| Fair and Equitable Treatment | Mandatory | Limited |
| Expropriation | Vague provisions | More clarification on exclusion of taxation, IPR matters |
| Investor-State Dispute Settlement | Allowed after domestic remedies exhausted | Stricter conditions like 5-year cooling off period |
Recent Policy Changes Regarding BITs
- India gave notices to 57 countries to terminate existing BITs and sign new pacts based on the revised Model BIT.
- As of 2024, India has allowed 23 BITs to lapse, including with Canada, Germany, and Sweden.
- In 2023, India sent termination notices to 15 more countries including Australia, France and United Arab Emirates. This takes the total BIT termination notices to over 70.
- India is currently negotiating updated BITs with the United States, European Union, United Kingdom among others based on the 2016 Model BIT.
- However, negotiations have been prolonged due to differences over key provisions.
Ongoing Concerns Regarding India’s BIT Regime
- Uncertainty for existing foreign investors whose BITs have been terminated on whether they will get protection under new pacts
- Several foreign investors have legally challenged India’s decision to unilaterally terminate BITs as violation of the initial pact conditions.
- There are also demands for clarifications on treaty provisions applicable during the “sunset period” between termination and final lapsing of old BITs.
India aims to balance investment protection with policy space through its new BIT regime. However, ongoing bilateral negotiations and treatment of existing investments during transition remain important aspects determining its ultimate success. Striking the right balance remains a key priority looking ahead.
