The Times of India | 16 December 2024

Free trade & investment deals hit model BIT hurdle

NEW DELHI: From Saudi Arabia to the UK and the European Union to Sri
Lanka, India’s model bilateral investment treaty (BIT) and the finance
ministry’ steadfast refusal to tweak it is posing problems not just for trade
negotiators but also for countries with which govt is seeking to work out
investment arrangements.

The issue of providing some carve outs has been discussed between officials
recently, said a govt source.

The discussions come ahead of Prime Minister Narendra Modi’s trip to Saudi
Arabia later this month, where the issue of setting up two refineries by Saudi
Aramco - in Gujarat with ONGC and in Andhra Pradesh with BPCL - is likely to be
on the agenda. In the past, the desert kingdom has expressed concerns over
India’s model BIT and it is one of the reasons for the talks on a bilateral trade
deal with the Gulf Cooperation Council not making much headway.

The issue is expected to crop up again when the British trade negotiators return
to the table next month as the Keir Starmer seeks to engage with India to thrash
out the details of the proposed free trade agreement (FTA) that has been in an on-
off mode for over one-and-a-half decades.

In 2016, govt had put in place the model BIT after it lost the case against White
Industries in 2010. Subsequently, two British companies, Cairn Energy and
Vodafone, used the arbitration clause after their investments in the country faced
large tax claims on a retrospective basis. In fact, even the India-UK Infrastructure
Financing Bridge, where British companies are seeking to execute projects and
later invest in roads and green energy sector, has been discussed.

India has, however, made concessions for UAE when it signed the FTA, which
could be a precedent of sorts when it comes to negotiating other trade deals and
investments, provided the other side is willing to agree to it.

Maybe it’s a negotiating position but the UK and the EU have shown no
inclination and have insisted upon tweaks in the investment chapter to address
their concerns around the model BIT.

Even Sri Lanka during its engagement for widening the scope of the current
trade agreement has flagged its concerns. While Singapore and South Korea still
have a window to use the earlier BIT, instead of the model treaty, Indian officials
have alerted Seoul to possible changes although it is unclear how it can be done.