The government has chosen to reevaluate its stance on bilateral investment treaties (BITs) in an effort to foster an environment that is more investor-friendly. The decision was made in response to the fact that few important trading partners have embraced the BIT text that India accepted following a thorough assessment in 2016.
The ministry of commerce and industry has been tasked by the prime minister's office with revising the 2016BIT model, according to official sources.A senior official said that the ministry will meet with attorneys and other experts on Monday to begin further talks on the topic.
Although the 2026model aimed to address the shortcomings in the previous text, particularly with regard to taxes, the ministry has been expressly requested to look at investor concerns in the present review.
One of the turn-offs for foreign investors, according to experts, is the existing text's lengthier mandate for dispute resolution using locally accessible options before turning to international arbitration. Furthermore, there is no provision for tax remedies in the BIT language, which may jeopardize investments.
On the basis of the amended BIT wording, just 7 BITs have been inked, but New Delhi is looking to establish agreements of this kind with at least another 36 nations. In recent months, India's FTA negotiations—including those with the UK—have also been hampered by the BIT text's outlines.
BITs usually provide a process for resolving disputes between investors and are intended to safeguard investors from signatory nations in each other's territories.
In her interim budget statement, Finance Minister Nirmala Sitharaman had stated, "We are negotiating bilateral investment treaties with our foreign partners to encourage sustained foreign investment." In a recent interview, Secretary of the Department for Promotion of Industry and Internal Trade Rajesh Kumar Singh stated that India's goal for the next five years is to bring in $100 billion in gross foreign direct investment (FDI) annually. India has gotten up to $59.6 billion in foreign direct investment (FDI) year in 2020–21.
The Department of Economic Affairs in the Ministry of Finance is responsible for overseeing investment treaties under the Allocation of Business regulations. However, the Commerce Ministry, acting as a "third party," has been tasked with reexamining the wording.
The ministry of commerce handles trade agreements and, in the process, needs to negotiate problems related to investment. Through clauses on investment facilitation, investment agreements can occasionally become a component of free trade agreements.
"A presentation is scheduled for (Monday's meeting). We are now debating the matter internally. The person stated that the Prime Ministers' Office is investigating the matter and has requested that the Commerce Ministry offer an outside viewpoint on the model wording.
With the UK, the European Union, Australia, Switzerland, Oman, Israel, Qatar, Tajikistan, Russia, Saudi Arabia, Mexico, Hong Kong, Mauritius, and a few other nations, India is now debating and negotiating BITs at various levels.
According to the authorities, a BIT could also be requested by the European Free Trade Association (EFTA), with whom India has inked a deal for a $100 billion investment over the course of 15 years.
Experts claim that the model BIT makes it difficult for other nations to implement new BITs as it requires investors to look for local solutions for at least five years prior to arbitration. This is not like the BITs that other nations sign. In some BIT models, there are no limitations on bringing issues to international arbitration; in fact, some even go so far as to provide stability in the direct tax regime in order to safeguard investor interests. Some nations in BITs want direct taxes to be predictable since frequent changes might disrupt whole supply chains if costs increase in one nation.
Experts list the BIT text's other shortcomings as "a narrow definition of 'investment, vague terms, and omission of principles like 'fair and equitable treatment' and Most-Favoured Nation status."
