Bilateral Investment Treaty talks with UK drag on as sunset clause, dispute resolution remain unresolved

New Delhi | Milan: India and the United Kingdom are still negotiating the proposed Bilateral Investment Treaty (BIT) which was to be announced alongside the free trade agreement (FTA) and the Double Contribution Convention Agreement.

Two issues, the sunset clause and dispute resolution, are pending, which is why the BIT talks are continuing, said people with knowledge of the matter. The UK is keen on bringing taxation issues within the purview of the BIT, something about which India has reservations, they said.

"Parliament has the sovereign powers on taxation and that cannot be brought within the BIT. But hopefully these issues can be resolved soon," one of the persons told ET on condition of anonymity. Earlier, there were plans to conclude all three deals simultaneously.


India insists on exhaustion of local remedies before an investor can take the state to arbitration for a dispute, something that many countries, including the UK, are opposed to under the investor state dispute settlement.

As per the model BIT text, investors need to exhaust local solutions for at least five years before arbitration. The provision is aimed at preventing arbitrators from having expanded jurisdiction and is a point of contention.

This treaty became crucial after India lost international arbitration disputes to investment treaty award holders such as Cairn Energy PLC, Vodafone Group BV and Devas Mauritius Ltd, and now it has to balance safeguarding foreign investment with protecting public interest.

The treaties help protect investors and investments.

While India had cancelled more than 70 of its 80-plus BITs by 2016, only seven countries have accepted the existing model text treaty.

While the finance ministry looks at investment issues, investment chapters are part of free trade agreements which the commerce department negotiates.

Investment is a sticking point in India's proposed trade pact with the UK.

Eleven investor-state dispute settlement cases were filed against India between 2000 and 2020, according to the United Nations Conference on Trade and Development.