Government to amend investment treaty to woo global players

New Delhi: The government is poised to revise the model bilateral investment treaty (BIT) in order to entice international investors, as the current five-year local remedy clause has been a source of contention for overseas investors. A cabinet note has been submitted by the finance ministry to amend the model BIT, which was established a decade ago, and it also plans to expand the definition of investment beyond enterprise-based to asset-based.

This includes shares and equity instruments that have been held for five years or more. The government is also considering certain exemptions, such as subsidies, local government measures, and compulsory licensing in instances of public health emergencies. The proposed changes could involve using investor-state dispute settlement (ISDS) as the basis for BIT negotiations.

BITs are international agreements between two countries that outline the terms and conditions for private investment, providing for national treatment and a dispute resolution mechanism. India's first model BIT was introduced in 1993 to attract foreign direct investment (FDI) and ease its foreign investment rules. However, following a surge in ISDS claims and a loss in a case involving Australian company White Industries in 2015, the government opted for a revision of the model treaty, resulting in the unilateral termination of most BITs.

Only six countries, including Belarus, Kyrgyzstan, Brazil, UAE, Uzbekistan, and Israel, have agreed to BITs with India since 2018, with India's recent trade and investment agreements with EFTA nations, Oman, the UK, and India-Brazil BIT providing only state-to-state obligations and excluding investor-state arbitration.