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India asks to renegotiate bilateral investment pacts

  • Published
    20th Mar, 2023
Context

India has issued termination notices to 68 countries for Bilateral Investment Treaties (BIT) with a request to renegotiate on the basis of the model agreement formulated in 2015.

About

About Bilateral Investment Treaties (BIT):

  • BITs are treaties between two countries aimed at protecting investments made by investors of both countries.
  • BITs encourage foreign investors to invest in a State and there by contributing towards overall developments and advancements of the economy.
  • Some essential clauses covered under BITs:
    • Applicability
    • Fair and Equitable Treatment and Full Protection & Security
    • National treatment and Most-favoured-nation treatment

Most favoured nation:

  • Most-Favoured-Nation treatment requires members to accord the most favourable tariff and regulatory treatment given to the product of any one Member at the time of import or export of “like products” to all other Members.
  • This is a founding principle of the WTO.
    • Expropriation
    • Dispute settlement mechanisms - between States and between an investor and a State
  • Objective of BITs: BITs protect investments by imposing conditions on the regulatory behaviour of the host state and thus, prevent undue interference with the rights of the foreign investor.
  • These conditions may include:
    • Imposing obligations on host states to treat foreign investment fairly and equally (FET) and not to discriminate against it.
    • Permitting the repatriation of profits under conditions that the two nations have agreed upon.
    • The ability for individual investors to sue host states for damages in the event that those latter's sovereign regulatory measures conflict with the BIT is the most significant provision.

India and BIT:

  • India had signed Bilateral Investment Treaties (BITs) with 83 countries/regions till 2015 based on the Model BIT of 1993 and as amended in 2003.
  • A 2016 study suggests that by providing substantive protection and commitment to foreign investors, BITs indeed contributed to rising FDIs in the 2001-2012 period.
  • However, in 2016 India launched the Model BIT. It aims to act as a base for negotiating new BITs with other States, as well as for re-negotiation of the existing ones.
  • As per Model BIT in 2016, India moved away from an overly investor-friendly approach to a somewhat protectionist approach concerning foreign investments.
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