Deconstructing India’s evolving approach toward international investment agreements

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IISD | 1 July 2023

Deconstructing India’s evolving approach toward international investment agreements


1. Introduction

India’s approach toward the negotiation of international investment agreements (IIAs) has recently been subjected to significant scrutiny. Despite signing its first BIT in 1994, with the United Kingdom, India witnessed the gradual development of international investment law jurisprudence silently. However, this changed in 2011, when India received its first adverse award in White Industries v. India, which determined the Indian courts’ delay in enforcing a commercial arbitration award in breach of India’s treaty obligation to provide effective means of asserting claims and enforcing rights in relation to investments.[1] This outcome was criticized and led the government to review its BIT program, including a review of the existing model BIT 2003.

During this review process, the government did not initially intend to remove a protected investor’s access to investment treaty protection. However, when it approved the revised text of the model BIT in 2015, it decided to terminate most of its BITs.[2] This approach was hardly isolated. But India’s disenchantment did not extend to the system of international investment law. The government also affirmed its intention to renegotiate new treaties—including with Switzerland, Tajikistan, the Kyrgyz Republic, Turkmenistan, Oman, Qatar, Belarus, Thailand, Zimbabwe, Armenia, and Morocco[3]—based on its revised model BIT 2015. India was keen to reimagine its relationship with the system of international investment law but not withdraw from it.

Since then, India’s attempts to negotiate an IIA have yielded limited success. India could conclude new BITs only with Brazil, Belarus, and Kyrgyzstan, none of which are yet in force. India’s FTA negotiations with the United Kingdom, Australia, the European Union (EU), and Canada, including for an investment chapter, are ongoing. In the meantime, the interim FTAs with Australia, Mauritius, and the United Arab Emirates (UAE), do not contain provisions for the protection of foreign investment. And, while Article 12.1 of the FTA with the UAE states that the parties “agree to finalise a new agreement [to replace the India-UAE BIT 2013] by June 2022,” no such agreement is yet in place.

India’s lack of progress naturally invited criticism. In 2021, a Parliamentary Committee in India found “the number of BITs/Investment Agreements signed post 2015 and the number under negotiations as inadequate [and] not commensurate with the growth of India’s interest in this domain and [her] rising stature in global affairs.” This article aims to contextualize and address this criticism, analyze the factors that may influence India’s current (and future) treaty negotiations, and in doing so, map India’s evolving approach towards IIAs.

2. What Motivates India’s “Approach” Toward IIAs?

The expression “India’s approach toward IIAs” is misleading. It wrongly assumes that India’s negotiations are guided by a uniform set of factors, such as the model BIT 2015, that set the goalposts for assessing their success. However, this assumption lacks nuance. As the Government of India had itself informed the Parliament in 2017, its “approach to investment treaties/agreements differs from country to country and attempts are made to reach mutually agreed position during the negotiations.”[4]

But what factors influence the differences in India’s approach while negotiating an IIA? The authors categorize their response into two sets: external factors and those internal to the country’s polity.

2.1. External Factors

First, the mainstream perceptions of international law operate with a political assumption that there must be some distance between state practice and law. This also extends to the system of international investment law, in which the contents of IIAs and the processes by which they are concluded are presumed to be objective and unrelated to state politics. However, this view does not stand up to historical and jurisprudential scrutiny. Ample ink has been spilled to establish that a state’s decision to conclude IIAs is a by-product of its political and economic standing—or lack thereof for the former colonies—in the post-colonial global order.[5]

Unsurprisingly, India’s acceptance of investment treaties from 1994 was equally triggered by an economic crisis in 1991 and the consequent liberalization reforms. This was in contrast to India’s previous resistance to the creation of an international law regime that facilitated an “absolute protection of private property” and required a state to provide its foreign investors more than national treatment.[6] Thus, it is natural that India’s recovery from the economic crisis and a consolidation of its political standing would also impact its negotiation prowess, pace, and strategy in relation to IIAs. This contextualizes India’s reluctance to conclude an IIA without being convinced of its benefits. This understanding is affirmed by the statements made in relation to India’s ongoing FTA negotiations. As a news report concerning the India–EU FTA negotiation states: “The current government is not in a hurry to sign trade deals. India is an economic power and is set to become a developed country in the next 25 years. Today, it negotiates from its strength.” A similar sentiment was reportedly echoed by India’s Minister for Commerce and Industry, in relation to the ongoing India–UK FTA negotiations, stating that the FTA “has to be a win-win for both countries.”

Second, India’s conclusion of BITs post-1994 was premised on an untested belief that this was a necessary step for developing states to compete for foreign investment. But this belief has now come under intense scrutiny. In mid-2022, the Committee on External Affairs noted that a study commissioned by the Ministry of Finance’s Department of Economic Affairs (DEA) had concluded that “a relationship between investment and signing a particular treaty cannot be established.” Likewise, an internal note prepared by the Ministry of Commerce stated that “while IIAs may be a desirable objective, they are neither necessary nor sufficient for promoting FDI.”[7] This was consistent with emerging academic studies[8] and the documented experience of countries such as Ecuador and South Africa.

The authors do not take any definitive position on this issue. But the government’s doubts about the capacity of IIAs to attract foreign investment adds another wrinkle to the discourse. Given these doubts, one would reasonably expect that “rational policy-makers would try to assess whether the treaties were in fact useful to attract investment based on a rigorous and balanced search of available information,” and assess “alternative ways of attracting foreign investment.”[9] And this was reflected in global trends: since 2017, the number of effective terminations of BITs has begun to outpace the number of new treaties signed.

Third, these considerations are, however, also countervailed by reasons that reinforce the utility of IIAs. For instance, policy reforms have failed to attract sufficient foreign investment in India’s upstream natural gas industry, and potential investors are demanding both increased protection from expropriation and neutral arbitration of disputes. Simultaneously, India’s own identity as a perennial recipient of foreign investment is changing. As one scholar notes, “many developing countries today such as India have become huge exporters of capital… Thus, India cannot look at the investment regime purely from a capital-importing country-perspective – something that it could do two decades back.”[10] Accordingly, despite its doubts and a lack of progress, India remains a keen participant in the negotiation of IIAs.

Fourth, India’s vision of a model IIA must also adapt to the identities and expectations of the other negotiating state. This is best illustrated by the varied approaches to ISDS that India is required to consider during the ongoing negotiations. On the one hand, Australia has avoided ISDS provisions in its recent FTAs, which include the Regional Comprehensive Economic Partnership Agreement (2020) and the Australia-UK FTA (2021). This mirrors the India–Brazil BIT 2020, and therefore, should appeal to India. On the other hand, while the UK did not include ISDS provisions in its recent FTAs with Australia and Japan,[11] the House of Lords nevertheless recommended that there is “a strong case for including [ISDS] provisions in an agreement with India.” This will likely make the negotiation with the United Kingdom challenging.

A similar predicament is expected with regard to the EU’s proposed text on an Investment Protection Agreement (IPA), which envisages the establishment of a permanent tribunal of first instance comprising 15 judges (Article 3.9) and an appeal tribunal (Article 3.10). None of India’s existing IIAs (or any model BITs) include such a mechanism, thus requiring India to consider the (dis)advantages of the EU proposal for the first time before finalizing any agreement.

Understandably, notwithstanding the content of the model BIT 2015, these considerations preclude a monolithic approach toward IIAs. How the Government of India may approach a particular negotiation would be contingent on its perceived political strength, perceptions about the efficacies of IIAs, identity as an exporter or importer of capital, and the identity of the other negotiating party. Significantly, these are also corroborated by a further set of internal factors relating to India’s polity.

2.2. Internal Factors

Within the Indian system, an important but often under-discussed consideration has been the mandate of the negotiating government department. Prior to the 2015 model BIT, India’s engagement in IIAs was led concurrently by the Finance Ministry’s DEA and the Department of Industrial Policy & Promotion (DIPP; now the DPIIT) at the Ministry of Commerce.[12] While the DEA negotiated the stand-alone BITs signed by India, the DIPP took the lead in negotiating investment liberalization chapters in the FTAs that India was signing at the time.[13]

This division of competencies had practical consequences. First, while the stand-alone BITs negotiated by the DEA ensured protection only after the fact of an investment, that is, in the “post-establishment” phase, the investment liberalization chapters negotiated by the DIPP went beyond India’s BITs by also ensuring non-discriminatory treatment in the right of establishing an investment, or the so-called “pre-establishment” phase; Second, unlike BITs, the investment liberalization chapters scheduled the sector-wise market access commitments that India would provide to investors of the FTA parties, thus partly “freezing” India’s autonomous investment liberalization policy.[14] So, in the India–Singapore CECA, a positive-list approach was followed by listing sectors where non-discriminatory treatment would be ensured for foreign investors; in the CEPAs signed with Korea and Japan, India followed a negative-list approach, enlisting sectors where no obligation to ensure non-discrimination would apply.

This disjointed approach to negotiating IIAs was noted in the internal note prepared by the Ministry of Commerce. It acknowledged the need to address this split competence regarding investment negotiations and suggested that the pre- and post-establishment approach should be merged.[15] Indeed, the latter was among the considerations in India’s internal consultations in the lead-up to the release of the model BIT in 2015.[16] With the release of the 2015 model BIT, the mandate for negotiating IIAs, however, regardless of whether they were stand-alone BITs or located as investment chapters in FTAs, was allocated fully to the DEA in order “to ensure convergence between trade and investments issues.”[17]

This marked an important shift since the model BIT was concerned only with investment protection in the post-establishment phase and would act as the text on which the DEA would base negotiations. The reform process, however, left unclear how issues concerning investment liberalization, including pre-establishment phase issues, would be dealt with in negotiations and by whom. At the same time, the DIPP began to undertake measures to liberalize foreign investment. This included abolition of an investment regulatory board in 2017, introduction of standard procedure for easier approval of foreign investment by individual Ministries, and the gradual liberalization of sectoral limits on FDI.

Yet another issue left unresolved was how commitments made in the FTAs’ Trade in Services chapters negotiated by the Ministry of Commerce would fit within India’s new approach toward doing IIAs. Since the supply of services through commercial presence (i.e., mode-3 supply) had an overlapping relationship with investments, India’s FTA practice till then had been to use “Services-Investment Linkage” provisions to address explicitly how and which investment protection obligations in the FTA’s investment chapters would apply to the supply of services via commercial presence (India–Singapore CECA (2005), Article 7.24; India–Korea CEPA (2009), Article 6.23; India–Japan CEPA (2011), Article 83.3, and India–Malaysia CECA (2011), Article 10.3.). Amidst the shift in competencies, the role of the External Affairs Ministry’s has remained somewhat the same. As it told the Parliamentary Committee in its reply concerning the lack of progress on negotiating BITs, the Ministry plays a limited role by facilitating negotiations and coordinating with Indian Missions abroad. The responsibility to lead negotiations and conclude them still lies with the DEA.

What have these changes meant for India’s negotiation outcomes? As mentioned before, the success of the model BIT has been limited. Since India’s BITs with Brazil, Kyrgyzstan, and Belarus were negotiated based on the 2015 model BIT, they deal only with post-establishment protection. FTAs done with the UAE, Mauritius, and Australia do not feature any commitments on investment liberalization other than those made in Trade in Services chapters concerning service supply through commercial presence. Even there, India’s interim ECTA with Australia explicitly prohibits the parties from initiating a dispute against any decision or requirement pursuant to their foreign investment frameworks.[18]

Based on the above information, India’s negotiation strategy in FTA negotiations going ahead may face several challenges. For instance, the text proposed by the EU indicates that India would need to negotiate on commitments concerning investment liberalization. These include prohibition of performance requirements, non-discriminatory treatment and market access—subjects that feature in neither the 2015 model BIT nor the recent FTAs negotiated by India. FDI-related reforms undertaken internally by the DIPP show a clear preference for autonomous liberalization rather than locking in of sector-specific commitments in FTAs, thus further complicating India’s position in negotiations with the EU. Moreover, the text proposed by the EU on commitments concerning trade in services diverges significantly from the WTO’s General Agreement on Trade in Services. This is due to its structure and the manner in which the regulation of services supplied through commercial presence has been subsumed within the broader concept of investment, much like the EU–Canada CETA.[19] This approach is unlike any adopted by India in past FTAs and “key divergences” on these matters are already appearing in ongoing negotiations.


If India’s approach and engagement with IIAs can be distinguished into phases,[20] with the new IIAs being negotiated and concluded, India is poised to enter a new phase. While much of the commentary so far has focused on the prospects of the 2015 model BIT, shifting attention toward the external and internal factors that influence India’s strategy helps better explain its strengths and limitations. Admittedly, India negotiates today from a position of economic strength and carries a marked experience in dealing with IIAs. This approach is also motivated by seeking opportunities for its own investors and a renewed penchant for doing FTAs, many of which now deal with investment liberalization and protection.

Simultaneously, internal reforms undertaken alongside the 2015 model BIT have had their own influence. The number of BITs concluded since then has not matched India’s global stature, as the Parliamentary Committee was quick to note. And, unlike previous FTAs, India’s recent trade deals have not featured investment liberalization or its protection. Accordingly, future FTAs with the UK, EU, and Canada are likely to indicate a shift in India’s approach to doing IIAs. And therein lies the struggle in defining India’s evolving approach toward IIAs. If the published proposed texts are indicative, the success of India’s negotiations will require a moderation of expectations and a constant adjustment of strategy. Ultimately, as the global discourse surrounding the (in)efficacies of IIAs evolves, so, too, must India’s approach.

Harshad Pathak is an Indian lawyer, presently a doctoral candidate at the University of Geneva and a consultant with the International Arbitration team at Mayer Brown Paris; Shantanu Singh is an Indian lawyer, presently an International Law Fellow at IISD, LL.M. candidate at the Geneva Graduate Institute (IHEID) and a former research fellow (legal) at the Ministry of Commerce and Industry, Government of India;.


[1] White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award (30 November 2011) paras. 4.4.4–4.4.6.

[2] Parliament of India, Lok Sabha, Unstarred Question No. 169, answered by the Minister of State in the Ministry of Commerce and Industry, Government of India (17 July 2017).

[3] Parliament of India, Lok Sabha, Unstarred Question No. 169, answered by the Minister of State in the Ministry of Commerce and Industry (17 July 2017); Parliament of India, Rajya Sabha, Unstarred Question No. 2927, answered by the Minister of State in the Ministry of Finance (28 March 2017).

[4] Parliament of India, Lok Sabha, Unstarred Question No. 1754, answered by the Minister of State in the Ministry of Finance (10 March 2017).

[5] See generally Gathii, J. (1998). International law and eurocentricity. European Journal Of International Law 9(184); Bonnitcha, J., Skovgaard Poulsen, L. N., & Waibel, M. (2017). The political economy of the investment treaty regime. Oxford University Press, 20–22; Miles, K. (2013). The origins of international investment law. Cambridge University Press, 19–47.

[6] Rajput, A. (2017). Protection of foreign investment in India and investment treaty arbitration. Kluwer, 19; see also Ranjan, P. (2019). India and bilateral investment treaties. Oxford University Press, chapter 4.

[7] Department of Industrial Policy & Promotion, Ministry of Commerce, Government of India, Note on “International Investment Agreements between India and Other Countries” (on file with authors), p. 5.

[8] Hallward-Driemeier, M. (2003). Do bilateral investment treaties attract foreign direct investment? Only a bit … and they could bite (Policy research working paper No. 3121). World Bank; Singh, J., Shreeti, V., & Urdhwareshe, P. (2021). The impact of bilateral investment treaties on FDI inflows into India: Some empirical results (Working paper 391). Indian Council for Research on International Economic Relations.

[9] Skovgaard Poulsen, L. N. (2015). Bounded rationality and economic diplomacy. Cambridge University Press, 31–32.

[10] Ranjan, supra note 6, at 38.

[11] Ranjan, P. (2022). Emerging trends in investor-state dispute settlement in new free trade agreements. Global Trade and Customs Journal, 17(7/8), 333–334.

[12] Skovgaard Poulsen, supra note 9; 152; Ostřanský, J., & Pérez Aznar, F. (2021). Investment treaties and national governance in India: Rearrangements, empowerment, and discipline. Leiden Journal of International Law, 34(2).

[13] Department of Industrial Policy & Promotion Note, supra note 7, 2-3.

[14] Ibid.

[15] Ibid, p. 22.

[16] Garg, S., Tripathy, I. G., & Roy, S. (2016). The Indian model bilateral investment treaty: Continuity and change. In K. Singh & B. Ilge (Eds.), Rethinking BITs: Critical issues and policy choices. Madhyam, 73–75.

[17] Office Memorandum dated 28 December 2015, F. NO. 26/5/2013-IC, Investment Division, Department of Economic Affairs, Ministry of Finance, Government of India.

[18] India–Australia Economic Cooperation and Trade Agreement (2022), Annex 8D.

[19] See Descheemaeker, S.. (2016). Ubiquitous uncertainty: The overlap between trade in services and foreign investment in the GATS and EU RTAs. Legal Issues of Economic Integration, 43(3), 265.

[20] See Ranjan, supra note 6.

source: IISD