9.1. New Model Indian Bilateral Investment Treaty

A BIT is a treaty between two countries that sets out to provide certain basic protections to the investors of one state investing in another. For instance, most such treaties provide investors a guarantee of “fair and equitable treatment” — the clause, to draw an analogy from constitutional law, is broadly akin to the right of equality and protection against arbitrary state action.

♤ The Law Commission of India in its 260th report on the Draft Model Indian Bilateral Treaty has tried to maintain balance between the rights of the investors and the rights of the state;

♤ The new Indian Model BIT will provide appropriate protection to foreign investors in India and Indian investors in the foreign country;

♤ The essential features include an asset based definition of investment, non-discriminatory treatment through due process, national treatment, protections against expropriation, a refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration, and limiting the power of the tribunal to awarding monetary compensation alone.

A BIT increases the confidence of investors by assuring a level playing field and non-discrimination in all matters. It provides for an independent forum for dispute settlement by arbitration.

In turn, BITs help project India as a preferred foreign direct investment (FDI) destination as well as protect outbound Indian FDI.

♤ The model excludes matters such as government procurement, taxation, subsidies, compulsory licenses and national security to preserve the regulatory authority for the Government.

♤ India has unilaterally terminated its Bilateral Investment Treaty (BIT) with Netherlands and has also served notices to 20 EU members for termination of their respective BITs.