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The Finance Ministry is reviewing India’s Model Bilateral Investment Treaty (BIT) to make it more investor-friendly and align it with the country’s experience in investment negotiations and global practices. Economic Affairs Secretary Anuradha Thakur said consultations are underway and the revised model will soon be placed before the Union Cabinet for approval. The review comes as Indian companies increase their overseas investments and require stronger protection in foreign markets. The government is also considering lessons from investor disputes involving India and the differences between investment and trade agreements.
The Finance Ministry is reviewing India’s Model Bilateral Investment Treaty (BIT) to make it more investor-friendly and will soon approach the Union Cabinet for approval, Economic Affairs Secretary Anuradha Thakur said.
Speaking at an event organised by economic think tank NCAER, Thakur said the government is examining several clauses based on its experience in negotiations and global practices. Consultations are currently underway as part of the review of the Model BIT.
A BIT is an agreement between two countries aimed at promoting and protecting investments made by investors in each other’s territories. It provides certain guarantees to foreign investors and generally allows them to take disputes with the host country to international arbitration.
Thakur said investor disputes involving India are an important factor being considered in the review. She pointed out that investment and trade negotiations have different dispute settlement mechanisms. While investment protection treaties can allow investors to take sovereign governments to arbitration, trade agreements generally follow state-to-state dispute settlement, which provides greater scope for diplomatic negotiations and flexibility.
Investor protection has gained further importance as Indian companies increase their overseas direct investments (ODI), she said. The government needs to ensure that Indian companies and investors receive adequate protection in countries where they invest. Some provisions in the existing framework could therefore remain useful in protecting Indian investments abroad.
The Model BIT was approved by the Union Cabinet in 2015. Its revision assumes importance as relatively few countries have accepted the existing model, while several developed nations have raised concerns over provisions including dispute resolution.
Thakur also rejected the suggestion that concerns over investigative agencies were responsible for a decline in net FDI. She said gross foreign direct investment had reached a record level, while net FDI declined slightly last year. According to her, actions by law enforcement agencies, including the Enforcement Directorate, are generally procedure-driven and transparent, while excessive or frivolous action is controlled.
She added that foreign investors consider several factors when choosing investment destinations, including potential returns and economic and political stability.
Source PTI
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