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The India/UAE Bilateral Investment Treaty: Novel features in the next generation of BITs

Norton Rose Fulbright | July 2025

The India/UAE Bilateral Investment Treaty: Novel features in the next generation of BITs

The 2024 India-UAE Bilateral Investment Treaty is a significant development given the close economic ties between the two countries. We consider the key changes for investors and how the treaty reflects India’s developing approach to the balancing of its regulatory rights against those of private investors.

Background

In 2016, after facing a record number of investor-state dispute settlement (ISDS) claims, India decided to rebalance its investment treaty regime to better protect its perceived interests. It unilaterally terminated most of its legacy bilateral investment treaties (BITs) and developed a Model BIT (the 2016 Model BIT) (link) as a basis for a new generation of BITs. The India-UAE BIT, which came into force on August 31, 2024 (the 2024 BIT) (link) and replaced the 2013 India-UAE Bilateral Investment Promotion and Protection Agreement (the 2013 BIT) (link) is the latest articulation of India’s refreshed investment treaty policy. With US$83.6 billion in cross-border trade between the two countries in FY2023-2024 alone, the 2024 BIT will impact significantly on existing and prospective investments.

Key features

Covered investments: The 2024 BIT restricts “investment” to specified categories of portfolio and asset-based investments provided that they have the following characteristics: (a) gcommitment of capital or resources, (b) expectation of gain or profit and (c) assumption of risk. This represents a middle ground between the 2013 BIT which defined assets broadly and did not provide for any specific investment characteristics, and the 2016 Model BIT which specifically excludes portfolio assts and imposes additional requirements – long-term commitment and contribution to host state development. By defining assets in this way, India is embracing a definition of investment akin to that adopted by tribunals in investment disputes under the International Convention for the Settlement of Investment Disputes 1966 (ICSID Convention).

Covered investors: Any natural or juridical person can be an investor under the 2024 BIT. Further, and unlike both the 2013 BIT and the 2016 Model BIT, the 2024 BIT expressly includes any entity controlled directly or indirectly by the relevant government or sub-national government in the definition of investor.

Standards of protection: The 2024 BIT maintains some of the familiar standards of protection commonly found in investment treaties (albeit subject to the carve-outs set out below) but omits others. Investments and investors under the 2024 BIT are:

  • Protected against denial of justice in judicial or administrative proceedings, fundamental breaches of due process, targeted discrimination on manifestly unjustified grounds, or manifestly abusive or arbitrary treatment, with a carve-out for measures taken for “legitimate public policy objectives”.
  • Guaranteed full protection and security limited to the physical security of the investment.
  • Guaranteed national treatment with a carve-out for discrimination between national and foreign investors/investments for legitimate regulatory purposes.
  • Protected against direct and indirect expropriation with specific stipulations as to the standard of compensation to which the investor would be entitled, factors to be considered in determining an indirect expropriation, with carve outs for non-discriminatory regulatory measures or judicial awards that are designed and applied to protect legitimate public interest or public policy objectives.
  • Guaranteed free transfer of investment-related funds, with carve-outs for transfers being restricted in the event of serious balance-of -payment difficulties, macroeconomic management.

The 2024 BIT omits two key standards of protection commonly found in many other investment treaties: fair and equitable treatment and most-favored nation. Thus, it provides a narrower suite of protection than the 2013 BIT. However, it offers clarity and broader protection as compared to the 2016 Model BIT. For instance, the latter stipulates that denial of justice and full protection and security provisions can only be triggered when the impugned conduct constitutes the violation of customary international law. The 2024 BIT omits this requirement.

Carve outs:

In line with the 2016 Model BIT, the 2024 BIT introduces several new general carve-outs, thus narrowing the scope of state measures that can be challenged by an investor. These include:

  • Regulations in pursuit of legitimate public policy objectives.
  • Taxation, notably, if the host state decides that an alleged breach of the treaty is a taxation matter, that decision cannot be reviewed by an arbitral tribunal.
  • Non-discriminatory measures relating to public morals, human, animal/plant life or health.
  • Measures taken to protect “essential security interests,” which the host state can assert either before or after the start of the relevant arbitration proceedings and are not open to review by an arbitral tribunal.

Investor obligations: The 2024 BIT also imposes a series of new obligations on investors aligned with the 2016 Model BIT, including an explicit obligation to:

  • Refrain from engaging in bribery or related offenses (effectively codifying an obligation that exists under customary international law).
  • Provide information required by the relevant laws.
  • Incorporate internationally recognized corporate social responsibility standards in their operations.

ISDS mechanism:

Exhaustion of local remedies: The 2024 BIT introduces a precondition to exhaust local remedies for a period of three years before initiating investment arbitration. While there was no such requirement in the 2013 BIT, it is less onerous than the 2016 Model BIT which imposed a five-year local remedies period.

Priority to domestic anti-bribery proceedings: Submission of a claim relating to any investments that has been finally judicially determined to have been made through fraud, corruption, money laundering, roundtripping or conduct amounting to an abuse or process is prohibited. A tribunal is required to suspend the arbitration if a judicial decision is either pending or proceedings are initiated in respect of such allegations in relation to the investment. This provision, which is unique to the 2024 BIT, could be problematic as the host state could effectively stall the arbitration by invoking anti-bribery proceedings in its domestic courts even if such a claim lacks merit.

Coordination of proceedings: When claims under the 2024 BIT and another international agreement have the potential of overlapping in terms of compensation or merits, the relevant tribunal is required to stay the proceedings until those under the other international agreement have come to an end.

Third-party funding: Third-party funding of arbitration claims is prohibited under the 2024 BIT. This is stricter than the 2016 Model BIT but is consistent with UAE’s treaty practice reflected, for instance, in the UAE-Argentina BIT (2018).

Seat: Arbitrations must be seated in a country that is party to the New York Convention (NYC).

Enforcement: Awards made under the 2024 BIT shall be considered to be commercial for purposes of Article 1 of the NYC – this addresses the reservation made by India as to the enforcement of foreign-seated NYC awards. Further, each party is required to provide for the enforcement of an award made under the 2024 BIT under its domestic laws – this overcomes the fact that the UAE is not currently notified by the Indian government as a reciprocating NYC territory, which is a precondition for enforcement of NYC awards in India.

Appeals facility: Provisions are made for the parties mutually establishing an appellate body or similar mechanism to review awards made under the 2024 BIT.

Joint interpretations: The 2024 BIT incorporates a general provision stipulating that arbitral tribunals will be bound by the parties’ joint interpretations as to the provisions of the treaty and their application. It omits a provision in the 2016 Model BIT for Tribunals to request such joint interpretations on the subject matter in dispute on their own account, or upon the request of the relevant host state.

Other procedural issues: In line with the 2016 Model BIT, the 2024 BIT also introduces several detailed provisions covering matters such as:

  • Qualifications of arbitrators
  • Conflicts of interest and arbitrator challenges
  • Document production – notably, arbitrators are not permitted to compel the production of documents that the host state claims are protected from disclosure under applicable law
  • Frivolous claims: tribunals are required to decide, as a preliminary matter, any objections to jurisdiction or claims that are manifestly without legal merit or unfounded as a matter of law
  • Apportionment of costs – stipulating that each party shall bear its own legal costs.

Substantive law: While the substantive law provisions in the 2024 BIT are broadly similar to those in the 2016 Model BIT, a point of departure is that the 2024 BIT omits a stipulation that the treaty “shall be interpreted in the context of the high level of deference international law accords to States with regard to their development and implementation of domestic policies,” which is included in the 2016 Model BIT.

Compensation and recoverable loss: In line with the 2016 Model BIT, the 2024 BIT specifies that a tribunal can only award monetary compensation which is limited to actual loss, and then goes further by expressly excluding incidental and consequential damages including future losses. It also requires (similar to the 2016 Model BIT) that damages shall be reduced by accounting for mitigating factors including unremediated harm to the environment or local community or other relevant considerations regarding the need to balance public interest and the interests of the investor.

Conclusion

The 2024 BIT reflects India’s evolving approach towards investment treaty protection which is characterized by narrowing and particularizing existing protections and introducing novel safeguards, while providing strategic and selective concessions to a key trading partner such as the UAE.