The Hindu BusinessLine | 1 February 2025
Model Bilateral Investment Treaty to be made more investor friendly: FM
By Amiti Sen
In a much deliberated move that could speed up long-drawn bilateral investment pacts with partner countries, the government has decided to revamp the Bilateral Investment Treaty model to make it more “investment friendly”, per Finance Minister Nirmala Sitharaman’s budget announcement.
“To encourage sustained foreign investment and in the spirit of ‘first develop India’, the current model BIT will be revamped and made more investor friendly,” Sitharaman said in her Budget 2025-26 speech on Saturday.
The revamped BIT model may finally help India forge new BITs with many of its trade and investment partners that were finding certain provisions in the existing model “too restrictive”, such as those related to the investor-state disputes, say experts.
It could also give a push to India’s free trade agreement negotiations with partners such as the EU and the UK that have been seeking a robust BIT in tandem with a liberal trade pact.
A BIT is an agreement between two countries to promote and protect investments in each other’s countries.
Following adverse arbitration rulings in high-profile cases such as Cairn Energy, Vodafone, and White Industries, India had introduced its model BIT in 2016 to limit the scope of Investor-State Dispute Settlement (ISDS) claims and better safeguard its regulator autonomy. It unilaterally cancelled most of the 80-plus BITs it had with various countries.
“While the government sought to prevent further legal vulnerabilities by adopting a highly restrictive Model BIT, the result was a framework that was too narrow to attract new investments. Its exclusion of key investor protections—such as ‘fair and equitable treatment’ and Most-Favored Nation status—left India with an investment treaty framework that was out of sync with global best practices,” said Ajay Srivastava, founder, Global Trade and Research Initiative.
The consequences were evident in protracted negotiations with at least 37 countries, as India’s rigid stance hindered the progress of new agreements, he said.
“India’s rigid approach to investment treaties over the past decade has cost it valuable foreign investments and created unnecessary roadblocks in international negotiations. A shift in policy signals that New Delhi is finally acknowledging the need to align with global investment norms,” Srivastava added.