The Prime Minister’s Office (PMO) has directed the commerce ministry to review the existing model text of the bilateral investment treaty (BIT) to enhance the ease of doing business.
What Bilateral Investment Treaty (BIT)?
- BITs are reciprocal agreements between two countries to promote and protect foreign private investments in each other’s territories.
- BITs set out fundamental assurances between two nations concerning the treatment of foreigninvestments. These guarantees typically include provisions for:
- National Treatment: Treating foreign investors at par with domestic companies.
- Fair and Equitable Treatment: In accordance with international law.
- Protection from Expropriation: Limiting the host country’s ability to seize or take control of foreign investments within its territory, except under specific conditions and with adequate compensation.
Model Text for the Indian BIT:
- The Union Cabinet adopted a new Model BIT text in 2015, replacing the previous Indian Model BIT from 1993.
- The revised model BIT will be used for re-negotiation of existing BITs and negotiation of future BITs and investment chapters in CECAs/ CEPAs / FTAs.
- The Indian Model BIT text offers suitable protection to both foreign investors in India and Indian investors abroad, drawing from relevant international precedents and practices.
- It strikes a balance between investor rights and government obligations.
- BITs enhance investor confidence by ensuring a level playing field and non-discrimination, while also establishing an independent arbitration forum for dispute resolution.
- Consequently, BITs contribute to positioning India as a favored destination for foreign direct investment (FDI) and safeguarding outbound Indian FDI.
Key feature of Model BIT text 2015:
- “Enterprise” based definition of investment.
- Non-discriminatory treatment through due process.
- National treatment.
- Protections against expropriation.
- A refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration.
- Limiting the power of the tribunal to awarding monetary compensation alone.
- Enterprises operating within the territory of each Party are encouraged to incorporate internationally recognized standards of Corporate Social Responsibility (CSR) voluntarily.
Issues with Model BIT text 2015:
- Only seven countries have accepted the current model text of the bilateral investment treaty (BIT).
- Most developed nations have reservations, especially regarding dispute resolution clauses.
- Other issues include a bias in favor of the government’s regulatory authority, ambiguity in certain areas such as the duration of the enterprise, and the imposition of an arbitrary five-year period to exhaust local remedies in dispute resolution, among others.
History of India’s BIT:
- India signed its first Bilateral Investment Treaty (BIT) in 1994, and has since signed BITs with 83 countries.
- These agreements were mainly negotiated using the Indian Model BIT of 1993.
- Since the adoption of the Model text of the BIT in 2015, Notices of Termination of BITs based on the 1993 Model have been issued to 77 countries, as of September 2021.
- Additionally, India signed a BIT with the UAE in February 2024.
Ref:Source
| UPSC IAS Preparation Resources | |
| Current Affairs Analysis | Topperspedia |
| GS Shots | Simply Explained |
| Daily Flash Cards | Daily Quiz |