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India on the IFA negotiations

  • Published
    8th Apr, 2023

India should not be opposed to joining the investment facilitation agreement (IFA) negotiations for fear of investor-state dispute settlement claims which has backed by more than 100 countries excluding India.

  • In December 2021, 112 WTO members co-sponsored a Joint Statement on Investment Facilitation for Development, in which they recognize the Consolidated Document by the Coordinator as the basis for their on-going negotiations and state their objective to conclude the text negotiations by the end of 2022.
  • Launched in 2017 by a group of developing and least-developed WTO members, the Joint Initiative aims at developing a multilateral agreement on Investment Facilitation for Development.
  • It will improve the investment and business climate, and make it easier for investors in all sectors of the economy to invest, conduct their day-to-day business and expand their operations.
  • Facilitating greater participation of developing and least-developed members in global investment flows also constitutes a core objective of the future Agreement.

The initiative does not cover market access, investment protection and investor-state dispute settlement.

  • The proposed IFA is meant to create legally binding provisions aimed at facilitating investment flows.
  • The legal obligations inter alia will require states to augment regulatory transparency and predictability of investment measures.
  • This agreement will be very different from investment protection agreements such as bilateral investment treaties (BITs).
  • In BITs the foreign investors are allowed to bring claims against the host state for alleged treaty breaches. This is known as investor-state dispute settlement (ISDS).

India’s position on Investment facilitation Agreement:

  • One of the reasons India is not a party to IFA negotiations is the apprehension that foreign investors could use a future IFA to bring claims under the existing BITs.
  • Arguably, foreign investors may use the most favoured nation (MFN) provision in BITs to borrow or import stipulations from the IFA perceived to be more advantageous than those given in the underlying BIT.
  • The foreign investor may use the ubiquitous provision of fair and equitable treatment (FET) present in BITs to challenge non-compliance with IFA.

As a BIT clause that allows contractual and other commitments owed to a foreign investor to be brought under the treaty’s protective umbrella.



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