Govt approves revised BIT model, excludes tax matters
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The Economic Times | 16 December 2015

Govt approves revised BIT model, excludes tax matters

The Cabinet today approved the revised model text for the Bilateral Investment Treaty (BIT) with a view to enhancing protection of foreign investors in India as well as Indian investments abroad, but taxation matters will remain out of its 3-bn joint fund for
ambit.

"The revised Indian model text for BIT will replace the existing Indian Model BIT," an official statement read, following a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi.

The model BIT, which will be used for renegotiations of existing and new investment treaties, excludes matters such as government procurement, taxation, subsidies, compulsory licences and national security to preserve the regulatory authority of the government.

"The new Indian model BIT text will provide appropriate protection to foreign investors in India and Indian investors in the foreign country in light of relevant international precedents and practices while maintaining a balance between the investor’s rights and the government obligations," the statement said.

The revised model BIT will be used for renegotiation of existing BITs and negotiation of future BITs and investment chapters in Comprehensive Economic Cooperation Agreements (CECAs)/Comprehensive Economic Partnership Agreements (CEPAs) /Free Trade Agreements (FTAs).

"A BIT increases the comfort level and boosts the confidence of investors by assuring a level-playing field and non-discrimination in all matters while providing 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 out-bound Indian FDI," it added.

The essential features of the model BIT include an enterprise-based definition of investment, non- discriminatory 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.

There have been extensive socio-economic changes since 1993 when the model text of BIT was first approved. The nature of government regulation concerning foreign investment has evolved too.

The government has so far signed BITs with 83 countries, which have been largely negotiated on the basis of the Indian Model BIT of 1993.

There have been extensive socio-economic changes since 1993 when the model text of BIT was first approved. The nature of government regulation concerning foreign investment has evolved too.

"A wide variety of laws now regulate investments both at the central and state levels. During the last few years, significant changes have occurred globally regarding BITs, in general, and investor-state dispute resolution mechanism in particular," the statement said.