Cabinet approves revised text for Bilateral Investment Treaty

NEW DELHI: The cabinet has cleared the revised Model Text for the Indian Bilateral Investment Treaty, which seeks to plug loopholes in earlier agreements ensuring that India does not get dragged into international arbitration on any issue settled by a judicial authority.

The template will be used for renegotiation existing agreements and future ones the country will enter into. The revised text provides for a refined Investor State Dispute Settlement (ISDS) that requires that foreign investor exhaust local remedies before commencing international arbitration.

As many as 17 companies or individuals including Vodafone International Holdings BV, Deutsche Telekom, Germany, Sistema of Russia, Children’s Investment Fund and TCI Cyprus Holdings served arbitration notices to India under various bilateral investment protection agreements after their investments ran into trouble in India or they faced adverse policy action.

These notices have created lot of adverse publicity for the government and impression of a hostile investment environment. White Industries Australia has even got a favourable award against India. “The model excludes matters such as government procurement, taxation, subsidies, compulsory licenses and national security to preserve the regulatory authority for the Government,” the government said in a statement. It also proposes limiting the power of the tribunal to awarding monetary compensation alone.

New Delhi will renegotiate all existing 82 treaties to safeguard country’s interests as most were signed much earlier and do not have provisions to address situations arising now due to changes in the overall business environment. “A BIT increases the comfort level and boosts the confidence of investors by assuring a level playing field and non-discrimination in all matters while providing for an independent forum for dispute settlement by arbitration,” the statement said.

The new framework will provide for equal treatment to foreign investors on a post establishment basis, once the investment has been made. “The model BIT includes an “enterprise” based definition of investment,” the statement said.