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India's BIT Reforms Post-2016 Analysis

After a 2011 tribunal ruling, India revised its Bilateral Investment Treaties (BITs) leading to a new model BIT released in 2016 that is heavily protectionist and unclear in its intentions. The model BIT limits investor protections, narrows the definition of 'investment,' and imposes high thresholds for claims, ultimately failing to provide the necessary security for foreign investors. The approach is criticized as self-defeating, suggesting that India should instead focus on reforming its domestic judicial system rather than pursuing a confusing BIT framework.

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34 views1 page

India's BIT Reforms Post-2016 Analysis

After a 2011 tribunal ruling, India revised its Bilateral Investment Treaties (BITs) leading to a new model BIT released in 2016 that is heavily protectionist and unclear in its intentions. The model BIT limits investor protections, narrows the definition of 'investment,' and imposes high thresholds for claims, ultimately failing to provide the necessary security for foreign investors. The approach is criticized as self-defeating, suggesting that India should instead focus on reforming its domestic judicial system rather than pursuing a confusing BIT framework.

Uploaded by

rishita reddy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

BITs position in India after 2016

In 2011, an international tribunal ordered India to pay 4.10 million Australian dollars to
White Industries under Indo- Australian BIT, after which India started revisiting the existing
BITs. They started drafting a new model BIT to replace the existing model of Bilateral
Investment Promotion Agreement (2003) as a knee jerk reaction to the judgement of the
tribunal. The draft was protectionist to the extreme. This was revised and was released in the
public domain in 2016 which, while making improvements, continues to indicate the
confusion in the government’s approach, in that it is not clear whether it wants to have a BIT
in order to protect foreign investors or to reassert its sovereignty. The BIT has more
exceptions to protections than protections themselves. The sole focus on the entire model BIT
is to limit the liability for the host state and raise the bar required to bring a claim under the
BIT. It narrows down the definition of “investment,” creates high threshold of breaches, and
removes much of the protections that investors largely rely upon. The “enterprise” based
definition is riddled with vague qualifications such as “certain duration” and “significance for
development of the party in whose territory the investment is made” but does not indicate as
to what these terms actually mean. The Indian approach to BITs is confused, self-defeating,
and will end up being a cause of worry for the Indian investors. The model BIT does not act
as the cushion investors need while venturing into a foreign territory. There is no win for
India or its investors in signing such BITs. Rather than pursuing a confused BIT approach,
India should focus on reforming its domestic judicial system. Further, the model BIT
completely omits the “fair and equitable treatment” standard. It has been replaced with
protections that require steep thresholds to be triggered and/or invoked. The well-recognized
doctrines of “MFN” and “legitimate expectation” are also absent. Further, the Vodafone tax
experience is also reflected in the model BIT where “taxation measures” have been exempted
from the protections offered under the BIT. The model BIT seems more like a restatement of
international law on sovereignty rather than a treaty meant to protect cross-border
commercial transactions. Another disadvantage of the model BIT is its insistence on the
investor exhausting the domestic remedies for at least five years before commencing an
arbitration under the BIT.

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