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INDIA REVAMPS ITS BILATERAL INVESTMENT TREATY REGIME

- Tejas Shiroor

Since 2003, India has been fending off repeated attacks by investors, with approximately twenty investor-state arbitration proceedings filed against it, three of which were initiated in 2016. Being one of the most frequent respondent states in the field of investment arbitration has certainly put India on the defensive.

In December 2015, India circulated a new Model Bilateral Investment Treaty (the Model BIT).

The protectionist provisions of the Model BIT are clearly intended to shield India from fresh attacks by investors. The Model BIT does away with significant protections that are conventionally relied upon by investors. For example, it does not contain a most favoured nation clause; it excludes the fair and equitable treatment protection; it compels investors to exhaust all local remedies, both judicial and administrative, for a period of at least five years, before initiating arbitration proceedings.

In 2016, the Indian government notified 57 countries with which its Bilateral Investment Treaties (BITs) expired, or are soon to expire, that it wished to negotiate new treaties upon the expiry of the old BITs. The Model BIT is the basis on which India has initiated, or will initiate, negotiations to replace old BITs.

While India’s protectionist stance adopted in its Model BIT is music to some countries, it is clearly noise to others.

As reported by IAReporter, in November 2016, India and Brazil successfully agreed on a BIT, which seems to be more inward-looking than the Model BIT even. Although the India-Brazil BIT is not publically available as yet, IAReporter has given us a sneak peek into its provisions, and investment arbitration is very conspicuous by its absence. The India-Brazil BIT has replaced investor-state arbitration with other alternative dispute settlement mechanisms. It is hardly surprising that India and Brazil have been able to see eye to eye; Brazil, which has no BITs in force, despite having signed several such treaties, has always tread carefully when it comes to granting investors the possibility of filing arbitration claims against it.

However, the Model BIT has not been able to impress the capital exporting States of the European Union (the EU). The significant reduction in the protections available to investors has been a bone of contention in negotiations between India and the EU, relating to the conclusion of the Broad-based Trade and Investment Agreement (BTIA). The BTIA is intended to replace the India-Netherlands BIT, which expired on 30 November 2016, as well as India’s BITs with 23 other EU States, which will lapse by the end of 2017.

In an article published on the Kluwer Arbitration Blog (available here), Tejas Shiroor discusses the Model BIT, the conclusion of the new India-Brazil BIT, as well as the implications of the lapse of the India-Netherlands BIT in further detail, so as to reflect upon what the changing landscape of India’s arbitration regime could mean for current and prospective investors.

By Tejas Shiroor, Associate, Lazareff Le Bars