PMO asks Union Ministry of Commerce to examine Model text of Bilateral Investment Treaty (BIT)

Posted 10 Apr 2024

2 min read

Exercise assumes significance as only 7 nations have accepted the existing model text, and most of the developed nations have expressed reservations on the text with regard to provisions like resolution of disputes.
BIT: It is a reciprocal agreement for according protection to investments by nationals and companies of one State in another State.

Post 1991 economic reforms and up to 2015, India signed BITs with 83 countries (based on Indian Model BIT, 1993).
Since adoption of Model text of BIT 2015, Notices of Termination of BITs based on 1993 Model were issued to 77 countries (till Sep 2021).
Recently, India has signed BIT with the UAE in Feb 2024.

Model text of BIT: Union Cabinet adopted new Model BIT text in 2015, which replaced Indian Model BIT, 1993.
- Since then, Model text 2015 is used for (re)negotiations of BITs and investment chapters of FTAs/ Economic Partnership Agreements.

Key Features of Model BIT 2015
- "Enterprise" based definition of investment.
- National Treatment: Similar treatment as domestic investors.
- Protection from expropriation (limiting each country’s ability to take over foreign investments in its territory).
- Corporate Social Responsibility (CSR): Voluntary incorporation internationally recognized standards of CSR by enterprises operating within territory of each Party.
- Settlement of Disputes: Exhaust local remedies before commencing international arbitration.

Issues with Model BIT 2015: Skewed in favour of the Government’s regulatory power, ambiguity in certain areas like duration of the enterprise, arbitrary period of 5 years to exhaust local remedies in dispute resolution, etc.

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